Investor Demand for S&P 500 Downside Protection Plummets 75% Since March
Investor demand for draw back safety on the S&P 500 has collapsed since March. The common three-month single-stock put-call skew now sits on the fourth-lowest studying in 20 years.
The hedging gauge has fallen 75% since March. That marks its sharpest plunge for the reason that April-to-May 2025 interval.
S&P 500 Put-Call Skew Slumps to 0.04
Data from The Kobeissi Letter reveals the three-month put-call skew throughout S&P 500 single shares at 0.04. That determine falls wanting ranges recorded throughout the 2021 meme-stock frenzy.
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The reversal is hanging. In March, the same single-stock gauge sat at roughly 0.15, the best studying since August. The broader S&P 500 index put-call skew reached practically 0.50, close to three-year highs.
A better studying displays heavier put-option demand and bearish positioning. A decrease studying, in the meantime, signifies merchants are lowering hedges and leaning into upside publicity.
The present 0.04 stage suggests the market is pricing in virtually no demand for crash insurance coverage. The Kobeissi Letter defined the shift in dealer habits on X.
“Investors are now not serious about draw back danger,” the publish learn.
Record Rally and Geopolitical Thaw Erase Crash Bets
The skew compression has performed out alongside a record-breaking run in US equities. The S&P 500 printed a recent all-time high in May. Since March 31, the index has appreciated more than 16%.
Geopolitics added gasoline on May 21. Reports of a near-final US-Iran draft brokered by Pakistan pushed $500 billion into US equities.
With draw back safety cheaper than on the peak of meme-era euphoria, the market is signaling confidence over warning. That risk-on tilt has traditionally benefited Bitcoin and different high-beta property.
The subsequent query is whether or not the framework might be transformed right into a signed settlement. If it stalls, complacency itself might develop into the catalyst markets stopped pricing in.
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