Institutions are hedging more capital than the 2008 level over last week. What does that mean?
Last week, traders of fifty or more options contracts bought to open nearly five million put options, spending $8.1 billion on those contracts, almost double the amount of any other week in 22 years, according to JasonGoepfert, chief research officer at Sundial and founder of SentimenTrader.
Goepfert describes the chart below as the most remarkable he’s seen in his career.
The net dollar value of premiums that institutional traders spent on buying calls to open minus buying puts to open. The lower the blue line, the more they spent on puts.
With options trading, it’s essential to consider both sides. Sometimes, when there is a spike in put buying, it’s because overall volume is higher, and there is a coincident spike in call buying. So, we prefer to net them out, which is what the chart below shows.
warns Goepfert.
Adjusted for market capitalization, demand for hedges matches levels from the 2008 financial crisis. It suggests the largest traders in the options market are “buying protection against a crash at a pace unlike anything the market has ever seen…Whatever the explanations, the data is clear – institutional traders are in a mad scramble for protection,” he concludes.
There is an increase in put buying for ETFs and indices too. It’s just much more pronounced in equities. That is because it may be easier to short stocks that are weakened by the macro environment and you get more volatility there too. It’s arguable that index put options are a good buy here based on where realized volatility has been.
said Brent Kochuba, founder of SpotGamma.
Source: MarketWatch, BNN Bloomberg
Disclaimer: Past performance can't guarantee future results. Investing involves risk and the potential to lose principal. This article is for information and illustrative purposes only.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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SpyderCall : Very good information here!!!
102117382 : wow...something is going on...
lily sg : In 2008, when this happened, it was also almost the bottom, how about this time???
71404971 : Looks the big boys know something, big drop coming when that .75 hits! S and P back to 3300!
70789716 : Market going down 20% more
Indestructible Emu 71404971 : .75 isn't going to scare anyone. that's expected. would need to be a full point
ad1987 : it's the cpi data they're betting on
71445342 : When will uncle Powell announce the .75 increase? When is the next time he is speaking?
71875031 : This is going to lead to another most hated bull rally of all time.
polite Alligator_405 : shit now I wanna hedge my hedge
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