Large investor lays out $31 million options hedge against U.S. stock market drop

Arts


FILE PHOTO: The New York Stock Exchange is pictured in the Manhattan borough of New York, September 21, 2015. REUTERS/Carlo Allegri/File Photo

NEW YORK (Reuters) – Monday’s slide in U.S. stocks prompted at least one large investors to load up big on stock options that would guard against a sharper hit to stocks into the start of next year.

JustForex

Shortly after the market opened on Monday, an investor paid about $31 million to buy 16,000 of January put options at the 2,980 level on the S&P 500 Index .SPX, according data from options analytics firm Trade Alert.

The position struck about 4.6% below the market’s current level around 3,124 appears to be hedging roughly $4.8 billion in assets, said Henry Schwartz, president of Trade Alert in New York.

An index put option gives the holder the right to sell the value of an underlying index at a fixed level in the future, thereby offering protection against a slide in the market.

U.S. stocks fell on Monday after President Donald Trump decided to restore tariffs on metal imports from Brazil and Argentina and weak factory activity fanned worries of a slowing domestic economy due to the long-drawn trade war with China.

The S&P 500 .SPX was 0.53% lower at 3,124.45 in afternoon trading.

“The trade may be a year-end hedge following last week’s all-time highs above $3154,” Schwartz said.

On Monday, the CBOE Volatility Index .VIX, a widely followed options-based barometer of expected near-term volatility for stocks, rose to a near 6-week high of 15.27 before paring gains to trade up 1.34 points at 13.96.

Reporting by Saqib Iqbal Ahmed; Editing by Dan Grebler



Source link

Loading...

Articles You May Like

Johnson plans big shakeup of government, civil service – newspaper
Labour Party blame game begins as crushing defeat looms
Jamaican wins Miss World title, says will work for sustainable change
I will repay your trust, Johnson tells ex-Labour voters on trip to north
Asking prices for UK houses post smallest December drop since 2006: Rightmove

Leave a Reply

Your email address will not be published. Required fields are marked *