Traders Boost Europe Hedges on Wildest Swings Since ?12: Options
– Bloomberg News
What a ride.
In the past two weeks, European equities tumbled almost 10 percent for the third time in 2014, then rallied the most in two years over three days. Intraday swings in the Euro Stoxx 50 Index this quarter have been the wildest since 2012, and options traders have ramped up protection. Contracts on the Europe gauge reached a 20-month high relative to prices for those on the Standard & Poor?s 500 Index, data compiled by Bloomberg show.
Contributing to the sentiment reversals: a deeper oil-price slump, Russia?s currency crisis and the prospects of a government collapse in Greece. The unpredictability is giving investors fits.
?In times like these and with a volatile index, everyone wants to buy a hedge,? said Carsten Hilck, who oversees about $4 billion at Union Investment Privatfonds GmbH in Frankfurt. ?It?s a sentiment problem. From oil to Greece and Russia, the bears can give you a lot of excuses to be nervous.?
The volatility comes after investors got up enough nerve to send money back to European shares for the first time in five months. They then pulled $321 million out of the Vanguard FTSE Europe ETF (VGK) in December. The exchange-traded fund tracks companies such as Total SA, Bayer AG and Banco Santander SA.
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