Investors are increasingly adopting hedging strategies as they navigate potential risks in the S&P 500, with the cost of protection against market pullbacks reaching its lowest level since before the pandemic. This shift in sentiment is driven by a decrease in aggregate buyside positioning in US equity futures, following an all-time high. The uncertainty surrounding the Federal Reserve's interest-rate cut trajectory adds to the cautious outlook, prompting traders to brace for potential volatility. The appeal of hedging is further amplified by the historically low cost of S&P 500 one-month 25-delta put implied volatility, encouraging investors to consider put options to mitigate downside risks.
The iShares Core S&P 500 ETF (IVV) saw a rise in activity, climbing 0.84% to $610.99 at 12:20 PM on Wednesday, December 11.