Investors are snapping up insurance against potential market downturns, even as the strong rally following the elections shows no signs of hitting the brakes.
The Cboe Skew Index, which keeps an eye on how much traders are willing to pay for options that protect against severe market moves, has surged since hitting a lull on November 12th. On Monday, it soared to over 167, marking its highest level in more than two months, as per data from LSEG.
The growing appeal for protective measures doesn’t necessarily suggest that traders are foreseeing a market crash. Instead, it seems they’re more focused on shielding their portfolios from unexpected swings after a year of impressive gains. Danny Kirsch, who leads options at Piper Sandler, explained in a chat with MarketWatch that it’s a precaution many are taking.
“A lot of funds have had good years, and they just want to safeguard their profits,” Kirsch observed.
As we approach year-end, Kirsch noted that there’s an almost unanimous optimism among investors about the continued market prospects.
