Cheap S&P puts offer prudent insurance
The guest argued that investors should use cheap S&P 500 puts and put spreads to hedge portfolios against a potential macro shock, funded by recent market gains.
The argument
Despite high individual stock volatility, the overall S&P 500 index volatility (VIX) remains low due to record-low stock correlation (6%), making index hedges relatively inexpensive.
The thesis, stress-tested
✓ What validates it
- ✓Spike in the VIX index
- ✓An increase in S&P 500 stock correlation above historical lows
▸ Risks discussed
- ▸Hedges may expire worthless if low-volatility environment persists
- ▸Continued stock-level dispersion keeps index volatility muted
Hear it yourself
"Sam Rolle, I think he stole that Mhmm. From BNY. Yep. I mean, that's what Sam Rolle will say. Well, my favorite question is the market's at an all time high. Should I sell? Like, seriously? And by the way That's the human condition. Yeah. Yeah. Are your children well mannered going into summer? Oh, they're great. They all have jobs. They all have jobs. They all have jobs. What's the fourth graduations? Oh. It's so great. They have jobs? They have jobs. What And by the way McDonald's or the researcher? No. No. No. They have real jobs based on their majors, and all the friends have jobs."
AFFILIATE LINK · ZORTIX MAY EARN A COMMISSION · NEVER A RECOMMENDATION TO TRADE