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 evident as aggregate buyside positioning in US equity futures has decreased after reaching 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, which measures the expense of guarding against moderate declines. As the market adjusts to post-election dynamics and anticipates changes in stabilizing flows, investors are increasingly considering put options to mitigate downside risks.
The ProShares UltraPro S&P 500 (UPRO) ETF saw a notable increase, rising 2.50% to $99.36 as of 12:20 PM on Wednesday, December 11.