Traders Hedging Record Rally Dabble in Exotic Options

Investors looking to protect against a pullback with stocks at peaks are venturing beyond plain-vanilla options.

The steady grind higher in the S&P 500 Index has pushed most gauges of implied and realized volatility to the lowest levels in months — in some cases years. The collapse in volatility after the April tariff shock has surprised many investors, given the geopolitical tensions and uncertainty around the impact of levies on corporate earnings.