Loading ...[personally, I’ll stand pat with my BAC & WFC way otm puts-these are truly the cheapest hedges on the planet-I think the chances of a crash going into an election like this one are small–but a crash is inevitable-if not this yr. then next?]
the question is – what’s the cheapest way to hedge against a crash scenario?
Bank of America’s Jason Galazidis has some answers for traders looking for some protection. The screen below shows that the hedges, ranked by the average, which are most underpricing historical drawdowns are Gold calls, EUR 10y receivers and TLT (US 20y+ Treasury) calls:
EUR 10y receivers and TLT calls screen as the best value hedges after Gold calls. Interestingly, USD 10y receivers screen materially richer owing to increased demand on heightened US trade tensions.
HSCEI puts are the second best screening equity hedge after RDXUSD (Russia) puts despite the HSCEI being the worst performing equity index in our screen (YTD peak vs. current levels).
EU Credit payers have richened remarkably over the last few months, particularly in IG, following the extreme widening in EU-periphery bond spreads in May. Our credit derivatives strategists note that the richening of downside tails in credit (payer skew) reached 8y extremes driven by heavy hedging demand.
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ZH READERS COMMENT:
gold was in an uptrend before 2001 & 2008, its been in a downtrend since 2011, its possible that it doesnt sell off this time and just rallies, it needs careful consideration, i now have all the physical gold and silver i want purchased in the last week, im fully hedged to the downside with futures and options, but im prepared to remove these at a moments notice if things start to smell different this time, we need to be very careful here, very interesting times indeed
https://www.zerohedge.com/news/2018-06-30/these-are-cheapest-market-shock-hedges-right-now