Choices Merchants Hedge Bets as VIX Soars

S&P 500 Value Outlook: Choices Merchants Hedge, Retail Will increase Bullish Bets as VIX Index Surges

• Fairness choices merchants shift to a protecting stance as market volatility explodes
• IG Shopper Sentiment reveals a bullish flip in S&P 500 retail dealer positioning
• France enters second nationwide lockdown as new COVID-19 instances spike

The S&P 500, together with the broader US fairness group, closed deep within the crimson on Wednesday as markets grappled with the specter of rising coronavirus an infection charges and mounting uncertainty headed into the November 2020 election. A pointy soar in volatility accompanied latest worth motion, with the VIX index climbing above the 40 deal with, which is the best studying since June. The rise in market volatility given the proximity to the election is in step with historic norms, however regarding for merchants nonetheless.

S&P 500 and VIX Index (Every day Value Chart)

Chart created with TradingView

The rise in volatility with the election now solely 6 days away might not be outdoors of historic norms, however the election backdrop is materially totally different given the present pandemic. New virus instances are rising at an alarming price in the USA. The US reported 73,096 new instances for Tuesday, a 6.1% rise over the previous 7 days, in keeping with The COVID Monitoring Venture.

US COVID Traits

Supply: The COVID Monitoring Venture

Europe’s day by day instances are additionally accelerating at an alarming tempo. In truth, France simply introduced a second nation-wide lockdown Wednesday afternoon. French President Macron mentioned, “The virus is spreading all through France at a tempo which even probably the most pessimistic forecasts didn’t anticipate.” France has seen almost 1,700 deaths during the last week in keeping with ECDC information.

Inspecting choices merchants’ positioning through Cboe’s Put/Name Ratio, which compares the quantity of put choices traded relative to name choices, reveals a studying of 1.148. That is the best learn since early Could. A worth above 1.zero signifies fairness index choices dealer positioning is skewed extra closely towards put choices relative to name choices, which suggests a bearish bias.

S&P 500 Index VS CBOE SPX Whole Put/Name Ratio (Every day Time Body)

Chart Created with TradingView

Trying IG Shopper Sentiment information, can analyze S&P 500 dealer positioning by the lens of retail CFD merchants. The latest IGCS report reveals the ratio of merchants quick to lengthy at 1.17 to 1. The quantity of merchants net-long elevated 12% from yesterday, and merchants net-short decreased 12 % over the identical timeframe. Not like choices merchants, who are likely to observe worth traits, retail CFD merchants seem like rising their bullish bets on the S&P 500. The latest motion suggests a bearish sign as we usually take a contrarian view on retail positioning.