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, as noted by Lori Calvasina of RBC Capital Markets. 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, which measures the expense of guarding against moderate declines.
The ProShares Short S&P500 ETF (SH) experienced a decline, dropping 0.84% to $41.53 at 12:20 PM on Wednesday, December 11.