Options Show S&P 500 Profit Shortage Amid Stock Gains
April 12 (Bloomberg) -- The biggest rally in seven decades has left investors so skittish that even forecasts for a 30 percent surge in U.S. earnings are failing to keep them from hedging bets on equities.
The premium on options that insure against losses in the Standard & Poor’s 500 Index over those wagering on gains, known as skew, rose to the highest level since June 2008, data compiled by Bloomberg show. Traders sought protection as shares rallied for six weeks, pushing a measure of momentum that compares stocks with their 50-day average to the most bearish reading in 13 months, according to Bespoke Investment Group LLC.
While forecasts for the fastest profit growth in 16 years restored $6.63 trillion to U.S. equities since March 2009, the worst times to own stocks were when companies reported quarterly results. The S&P 500 dropped more than 5 percent after earnings season began in October and January, rebounding after better- than-estimated income held valuations below historical averages.
April 12 (Bloomberg) -- The biggest rally in seven decades has left investors so skittish that even forecasts for a 30 percent surge in U.S. earnings are failing to keep them from hedging bets on equities.The premium on options that insure against losses in the Standard & Poor’s 500 Index over those wagering on gains, known as skew, rose to the highest level since June 2008, data compiled by Bloomberg show. Traders sought protection as shares rallied for six weeks, pushing a measure of momentum that compares stocks with their 50-day average to the most bearish reading in 13 months, according to Bespoke Investment Group LLC.
While forecasts for the fastest profit growth in 16 years restored $6.63 trillion to U.S. equities since March 2009, the worst times to own stocks were when companies reported quarterly results. The S&P 500 dropped more than 5 percent after earnings season began in October and January, rebounding after better- than-estimated income held valuations below historical averages.