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Large investor lays out $31 million options hedge against U.S. stock market drop

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Large investor lays out $31 million options hedge against U.S. stock market drop

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FILE PHOTO: The New York Stock Exchange is portrayed in the Manhattan neighborhood of New York on September 21, 2015. REUTERS / Carlo Allegri / File Photo

NEW YORK (Reuters) – Monday's US stock slide has led at least one major investor to invest heavily in stock options that would protect against a sharper stock hit early next year.

Shortly after the market opened on Monday, an investor paid about $ 31 million to buy 16,000 January put options at the 2,980 level on the S&P 500 Index. .SPX, according to data from options analysis firm Trade Alert.

The position reached 4.6% below the current market level of around 3,124 and appears to be protecting about $ 4.8 billion in assets, said Henry Schwartz, president of Trade Alert in New York.

An index put option entitles the holder to sell the value of an underlying index at a fixed level in the future, providing protection against a market downturn.

US stocks fell on Monday after President Donald Trump decided to restore tariffs on metal imports from Brazil and Argentina and weak industrial activity fueled concerns of a slowdown in the domestic economy due to the long trade war with China. .

The S&P 500 .SPX fell 0.53% at 3,124.45 in the afternoon trade.

"Trade can be a year-end hedge after last week's historic highs above $ 3154," Schwartz said.

On Monday, the CBOE Volatility Index .VIX, a barometer widely followed by expected short-term stock volatility options, rose to a nearly 6-week high at 15.27 before reducing earnings to rise 1, 34 points out of 13.96.

Report by Saqib Iqbal Ahmed; Editing by Dan Grebler

Our standards:The Thomson Reuters Trust Principles. . (tagsToTranslate) USA (t) USA (t) ACTIONS (t) OPTIONS (t) Hedge Funds (t) Options (t) Funds (t) Company News (t) Derivatives (t) Derivatives (t) Stocks volatile / Hot Stocks (t) United States

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