You Can?t Keep The Panic Out Of Stocks Forever, VIX Traders Say
By Callie Bost
?While the turmoil that rocked bond and currency markets in past weeks has been mostly absent from equities, it won?t be forever, options traders speculate.
They?re building hedges against equity swings to levels not seen in eight months, according to contracts tied to the benchmark gauge for U.S. stock volatility. Judging by the most popular options, many of them are bracing for disturbances in the next six days.
Placidity has ruled American equities for the better part of three years, a period in which the Standard & Poor?s 500 Index has had zero declines of 10 percent or more. In June, concern about the Federal Reserve, whose policy makers meet next week, has sent Treasury yields to the highest since October and the dollar to levels not seen in two months.
?This is people getting ahead of the Fed, buying equity volatility because it has been low relative to rates and FX volatility,? said Pravit Chintawongvanich, a New York-based derivatives strategist at Macro Risk Advisors. ?Equities have been in a very tight range lately and people feel like something has got to give.?