Stock Investors Are Finally Starting to Buy Hedges Again

  • CBOE put-call ratio spikes to highest since before election
  • VIX skew near lowest in 10 months, signaling gauge to climb

Are Markets Gearing Up for a February Pullback?

With the U.S. equity market waking from its slumber, investors are finally taking the hint to hedge their post-election gains.

The CBOE Volatility Index is coming off its biggest one-day rise since Nov. 3 and a separate measure of bearish bets relative to bullish ones has surged to the highest since President Donald Trump’s victory, according to Bloomberg data. It’s a departure from the tranquility in U.S. equities during the weeks following the election, a period in which the VIX fell to a 2 1/2-year low.

Here are some recent volatility recommendations from Wall Street strategists:

Volatility traders are finally making money in the era of Trump, whose policies on immigration and trade are arguably contributing to a decline that is now the biggest for any back-to-back days since the election.

While Monday’s intraday decline of as much as 1.2 percent jarred investors, sentiment on the VIX was already showing signs of a reversal. On Friday, options traders were paying the lowest premium in 10 months to protect against a further decline in the VIX, down from a five-month high at the start of 2017. The so-called fear gauge is now on pace for its biggest two-day climb since September.

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