Rising Hedging Costs Reignite Fear of Stock Market Dive
The fear of a stock market downturn is resurfacing as hedging costs rise. Options contracts betting on a 10% decline in the S&P 500 ETF are now 1.8 times more expensive than options that profit from a 10% rally. This indicates that investors are willing to pay more for protection ahead of key events such as the US consumer price reading and the Federal Reserve's interest-rate decision. While hedging has been a losing strategy in the face of a strong market, some traders are taking advantage of the current calm to acquire cheap protection against future volatility.