Stocks continue surging to record highs. Here's how to hedge
The S&P 500 has rebounded significantly, rising over 17% since March due to optimism around tariffs and strong earnings. This recovery has made hedging more affordable and strategically appealing for investors. With current market conditions, now may be an opportune time to consider protective measures against potential downturns.
- ▪The S&P 500 has rallied more than 17% off its March lows.
- ▪Hedging costs have decreased as volatility has compressed.
- ▪Current market conditions suggest that now is a good time to hedge against potential downturns.
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The S&P 500 has staged an impressive recovery, rallying more than 17% off its March lows on a combination of tariff relief optimism, resilient earnings and a powerful rebound in semiconductors. It is a move that has rewarded patience. It is also one that has quietly made hedging both more affordable and more strategically sensible.The arithmetic is straightforward. Protection costs less when volatility is compressed. With the VIX sitting in the high teens, well below the stress levels that accompanied the March selloff, the implied volatility priced into put options has pulled back sharply. Buying a one-month 2-2.5% out-of-the-money put (about 30 "delta", sometimes written as 30^) today costs a fraction of what it cost when the market was in free fall.
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