The end of the bull market could be near, and with that in mind (and really any time), it is a good idea to have a preparation plan in mind. Markets have risen sharply this year, and are back near their peak from 2018, explaining why hedging activity is growing. So how to hedge? Defensive sectors and bond markets are popular, but what about things like options and the VIX? Well, that latter has been diminishing in popularity recently, as the CBOE’s VIX did not respond to Q4’s volatility the way many expected. This has led to claims the market is fixed, and in any case, it has not performed well as an S&P 500 hedge. That leaves S&P 500 hedges themselves, such as 30-day SPX put options.
FINSUM: If you understand and are comfortable with options, use them. If you don’t, stay away and stick to sector and asset class-based hedging.