The main U.S. stock indexes all closed in the red on Thursday (7th), and the S&P closed up 1.5%, closing in the red for four consecutive trading days, setting a record for the best winning streak this year. However, the VIX panic index option hedging transaction has made a comeback, making Wall Street worry regarding U.S. stocks The rebound might be the calm before the storm.
Everyone on Wall Street seems to be bracing for a recession, although St. Louis Fed President James Bullard and Fed Governor Christopher Waller both believe recession fears have been exaggerated by the market. After a dismal first half of the year, the state of VIX options trading is unnerving.
The VIX call-put ratio recently rose to a 2-1/2-year high, with more than 440,000 VIX calls traded, outnumbering puts by 5.8 to 1. This is the highest number since January 2020.
The VIX index, used to measure the implied volatility of standard S&P 500 options, often moves in the opposite direction to the S&P. VIX investment is a safe-haven concept. The VIX index has fallen 11.1% over the past five trading days, near a recent low of 24 However, the S&P 500 rose only 2.35% over the same period, indicating that the decline in the VIX index did not lead to a corresponding rise in US stocks.
Danny Kirsch, options analyst at Piper Sandler & Co., said: “The VIX safe haven hasn’t worked as well as investors expected. It doesn’t look like much volatility this year. So far, it’s a terrible hedge.”
(This article is not open to partners for reprinting)
