Low VIX, High Stakes
Hedging ideas we're looking to action.
The VIX has fallen to the lowest level since Dec 24th 2024, at 14.3, coinciding with the S&P 500 hitting fresh ATHs. Earlier this week, ten-day implied vol dropped below realised volatility, essentially indicating that any immediate future concerns about a sell-off have been almost completely discounted.
Reduced hedging activity on the downside from this recent leg higher in the equity space means that the VIX could fall further if the S&P 500 continues to cruise higher.
Yet we’re looking for trade expressions to hedge ourselves against a potential drawdown, with VIX derivatives providing attractive correlated payouts. We believe implied volatility should be higher than realised as we head into Autumn, hence why we’re considering VIX plays now.
As always, when looking at hedges, it’s best to buy them when you can, not when you need them. Here are three of our favourite ideas we’re looking to allocate a few % of our portfolio to: