Booming Hedge-Fund Options Trade Suffers Worst Month in Decade

Implied volatility on the S&P 500 spiked as investors rushed to hedge at the index level following an escalation of the conflict in Iran. The move reflects a swift shift to risk-off positioning and higher demand for index options, likely increasing hedging costs and widening equity risk premia in the near term.

Analysis

Implied volatility on the S&P 500 spiked as investors rushed to hedge at the index level following an escalation of the conflict in Iran. The move reflects a swift shift to risk-off positioning and higher demand for index options, likely increasing hedging costs and widening equity risk premia in the near term.