Crash or Soar? Traders Are Preparing for Stock Market Extremes
- Options buyers bet on broad equities swings, not minor moves
- ‘A lot of concern of potential black swan events’: Cboe’s Xu
This article is for subscribers only.
Investors who just booked profits from one of the strongest first quarters for the S&P 500 Index in decades are preparing for what comes next — whether that’s stocks climbing higher or crashing back to earth.
With the stock market sitting at an all-time high as the second quarter begins, the tells for what traders are thinking lie in the options market. Demand for put options that pay off if there’s a minor correction is around the lowest in years. Meanwhile, traders are quietly picking up tail-risk hedges: instruments that do little if there’s a slight downdraft but offer protection if stocks swing wildly.