All articles tagged with #hedging
With markets feeling unusually calm despite evident risks, the article explores how traders can hedge against a potential spike in volatility, outlining protective strategies to shield portfolios.
A JPMorgan strategist suggests that gold could more than double in value over the next three years, driven by increased investor demand for hedging against equities, despite recent declines influenced by profit-taking in futures contracts. Goldman Sachs remains bullish, targeting $4,900 per ounce by the end of 2026, amid broader institutional interest.
U.S. stocks are experiencing a strong rally driven by economic growth and AI investments, while gold prices hit a record high as investors hedge against potential economic uncertainties like a government shutdown and geopolitical tensions. Both moves reflect investor confidence in the economy's resilience but also caution due to possible risks, with stocks benefiting from expected Fed rate cuts and earnings growth, and gold serving as a safe haven amid market tensions.
Investors are favoring vanilla options like S&P 500 put spreads over VIX calls for hedging due to cost and reliability concerns, amid a market rally driven by dovish Fed signals and upcoming Nvidia earnings. The steep VIX futures curve and recent flows into long VIX ETPs have influenced this shift, with traders cautious about volatility spikes and the impact of upcoming economic data.
As US markets reach new heights, investors are grappling with how much to hedge against potential downturns amid stretched valuations and signs of increased caution, balancing optimism with protective strategies like bonds and options while monitoring market resilience and volatility.
Fear of a stock market decline is resurging as hedging costs increase, driven by economic jitters, weaker job growth, and tariff concerns, leading investors to buy more downside protection amid heightened market stress and upcoming traditionally volatile months.
Investors are increasingly using exotic options like lookback and re-settable puts to hedge against potential market declines amid record-high stock levels and low volatility, especially in tech stocks, as they prepare for upcoming economic and geopolitical events.
Traders are increasing hedges against a wide range of Federal Reserve interest rate outcomes amid economic uncertainty, with market positions reflecting expectations of possible rate cuts or stability, influenced by economic data and trade policies, and with significant activity in options and futures markets.
Traders, previously complacent, are now seeking hedges for the S&P 500 as the demand for market insurance increases following a bumpy week, signaling a shift from the long-standing bullish sentiment amidst stalling Fed policy.
BNY Mellon's global head of ETFs, Ben Slavin, predicts that exchange-traded funds (ETFs) utilizing options overlays will be the next hot product in the market. Options overlays provide investors with a means to hedge against potential losses. Slavin expects more issuers to enter this space as the trend gains momentum.
Goldman Sachs predicts higher returns on commodities in the next 12 months, driven by higher spot prices, easing monetary policy, and hedging against geopolitical supply risks. The bank forecasts a 21% return on the S&P GSCI Commodity Index, with energy and industrial metals leading the way. Factors such as OPEC-driven declines in oil inventories, demand for green metals, and ongoing resilience in commodity demand are expected to support these returns. However, the bank has trimmed its 2024 average Brent price forecast due to factors such as a warmer fourth quarter and rising supply from some producers.
JP Morgan's nearly $16 billion Hedged Equity Fund is expected to reset its options positions on Friday, which could add to equity volatility at the end of a gloomy quarter for stocks. The fund uses an options strategy that seeks to protect investors if the S&P 500 falls between 5% and 20%, while allowing them to take advantage of any market gains in the average range of 3.5-5.5%. Options dealers take the other side of the fund's options trades, and to minimize their own risk, they typically buy or sell stock futures, depending on the direction of the market's move. Such trading related to dealer hedging has the potential to influence the broader market, especially if done in size, as is the case for the JPM trade.
Major oil consumers such as airlines have increased their hedging at a rapid pace, taking advantage of last week's low oil prices to hedge against the inevitable price rise. Swap dealers saw the second-largest increase on record in long positions in the ICE futures and options, as contracts increased by 54,000. Oil analysts are forecasting that there will be an oil price recovery this year, banking on a push of demand thanks to China’s reopening. Brent crude prices are now trading at $78.15 as of 10:00 am ET, a 0.08% gain on the day but a $3 gain on the week.
Piper Sandler recommends buying the dip on a regional bank that has hedged its interest rate risk, unlike Silicon Valley Bank. The bank's stock is a good investment opportunity in the current market.
The use of options-hedging strategies by traders has contributed to the recent surge in oil price volatility, according to analysts. These strategies involve buying and selling options contracts to protect against price swings, but can also exacerbate market movements. The increased use of options trading has been driven by a combination of factors, including rising uncertainty in the global economy and geopolitical tensions.