Hedging is a hot topic again as Jerome Powell’s Jackson Hole speech stoked enthusiasm that the Federal Reserve will cut rates in September, sending stocks back up near record highs.
With signs of generally extended positioning within equities, investors are debating the most effective way to protect gains before Nvidia Corp. earnings, jobs and inflation data and the Fed rate decision.
Read more: Wall Street Gets the Rally Signals From Powell It Was Hoping For
“Powell came in more dovish than feared and markets have clearly responded positively,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group. “We are seeing some investors rolling up protection on ETFs tracking the S&P 500 and buy call spreads in SPDR Gold Shares ETFs as a part of an inflation play.”
With the market still in “buy-the-dip” mode, many strategists are touting S&P 500 Index put spreads and, more recently, look-back or resettable puts that will be useful should markets continue grinding higher in the short term. But there is a notable omission among recent hedging candidates: buying calls on the Cboe Volatility Index — normally a go-to for investors.
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