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Rumbling in Options Market Is Sound of Traders Rushing to Hedge

  • Equity outflows persist as ETF investors give up on dip buying
  • Higher yields pose threat with share valuations under attack

The only thing that isn’t falling in markets is the price of protection -- complicating the lives of harried traders rushing to hedge.

The issue is particularly pronounced in equities, where the relative cost of loss-protecting put contracts is as high as its been any time in two years. The benchmark options index in the U.S., know as the VIX, on Monday briefly surged above longer-dated futures -- a relatively rare inversion that occurs when market volatility mushrooms.