(Bloomberg) -- With the U.S. equity market waking from its slumber, investors are finally taking the hint to hedge their post-election gains.
The CBOE Volatility Index is coming off its biggest one-day rise since Nov. 3 and a separate measure of bearish bets relative to bullish ones has surged to the highest since President Donald Trump's victory, according to Bloomberg data. It's a departure from the tranquility in U.S. equities during the weeks following the election, a period in which the VIX fell to a 2 1/2-year low.
Here are some recent volatility recommendations from Wall Street strategists:
- Sell VIX puts, buy call spreads to capitalize on potential floor in VIX: Macro Risk Advisors (Jan. 30)
- Buy VIX call spreads to position for a pick-up in volatility: Credit Suisse (Jan. 30)
- Use collars, buy calls on volatility: MKM (Jan. 25)
- VIX will remain lower in early part of 2017, then average 20-22 throughout rest of year: Weeden (Jan. 22)
Volatility traders are finally making money in the era of Trump, whose policies on immigration and trade are arguably contributing to a decline that is now the biggest for any back-to-back days since the election.
While Monday's intraday decline of as much as 1.2 percent jarred investors, sentiment on the VIX was already showing signs of a reversal. On Friday, options traders were paying the lowest premium in 10 months to protect against a further decline in the VIX, down from a five-month high at the start of 2017. The so-called fear gauge is now on pace for its biggest two-day climb since September.
To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net. To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Chris Nagi, Richard Richtmyer
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
