Stock pros are as hedged as ever under record-smashing S&P rally

With the S&P 500 notching a new record every day this week while YOLO traders snap up tech bets like it’s GameStop Corp. all over again, cries of complacency in the stock market are everywhere.

With the S&P 500 notching a new record every day this week while YOLO traders snap up tech bets like it’s GameStop Corp. all over again, cries of complacency in the stock market are everywhere. 

Yet in the world of equity options at least, there’s strong evidence the professional class is keeping its head in the market melt-up.

Big institutions are still paying a decent premium to hedge the S&P 500 Index compared with how tranquil the benchmark has actually been lately. Demand for protection is also intact at around the long-term average.

So even as the Cboe Volatility Index falls to around pre-pandemic levels, institutional managers are still buffering portfolios with protective derivatives -- reducing the risk of stock divestments at the first sign of trouble. 

“I feel pretty good,” said Michael Purves, chief executive officer of Tallbacken Capital Advisors. “The put-call ratio on the S&P has been falling, but it’s still pretty elevated.”