Puts Shrink Amid Longest Run of Market Calm Since 1995

Puts Shrink Amid Longest Run of Market Calm Since 1995
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Puts Shrink Amid Longest Run of Market Calm Since 1995

Some managers are now adding protection to portfolios as the cost of certain bearish bets is trading at discounts. The S&P 500 has now gone 32 months without a decline of 10% or more, and has failed to post a daily gain or loss exceeding 1%, the longest stretch of calm since 1995. This stability has crushed the demand for options that protect against turbulence, pushing the CBOE Volatility Index (VIX) down 43 percent from a peak in February, hitting a seven-year low on June 6. While there may be debate as to the need for protection at this time, the cost of protection appears inexpensive.

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