Hedging Is an Afterthought for Traders With S&P 500 Near Record
- VIX down in December, at lowest monthly average since August
- Strategists see more gains for the S&P 500 next year
How to Play the Record Setting Stock Rally
Fresh off three straight record closes and with call volume at all-time highs, options traders are adding to bullish bets on the S&P 500 Index. They’re paying the least since July 2014 to protect against a decline in the SPDR S&P 500 ETF Trust before Wednesday’s Federal Reserve rate decision.
Bullish investors who are skeptical of the S&P 500’s torrid pace of gains should buy call spreads, Credit Suisse Group AG equity-derivatives strategist Mandy Xu wrote in a Dec. 12 note to clients. She recommended using the strategy on stocks such as JPMorgan Chase & Co. and Transocean Ltd., which have rallied more than 10 percent since the presidential election, surpassing their 52-week highs, while the cost of bullish options on the shares has remained relatively stable.