Buy Options as Lower VIX Belies Risk, Macro Risk Says

U.S. stocks rallying amid the narrowest swings in three years have pushed the VIX down to a level that makes options attractive as a cheap hedge against losses, according to Macro Risk Advisors LLC.

While there are economic risks that might otherwise drive up the cost of buying options as insurance, the VIX is being dragged down by one of the lowest Standard & Poor’s 500 Index volatility levels in four years, said Macro Risk President Dean Curnutt. That means stock investors should buy options because their prices are poised to rebound next year on renewed concern about European government debt, according to Curnutt, who predicted the region’s credit crisis.