Economics
Stock Investors Hedged for a Crisis Risk a New ‘Pain Trade’
- Defensive positioning drives equity skew to one-year high: CS
- UBS Wealth likes call options in case of ‘outsized trade deal’
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Stock investors are hedged to the teeth, anticipating a looming crisis from fraught U.S.-China trade talks, recession risk or political bombs in Washington. That’s making it dirt cheap to bet on the bull market defying the odds.
Traders in S&P 500 Index options have rarely been this bearishly positioned, with nearly 2.5 puts outstanding for every bullish call. The cost of hedging, or skew, has spiked to one-year highs across multiple equity benchmarks and options tenors, according to an Oct. 7 note from Credit Suisse Group AG.