Hedging playbook goes ‘out the window’ as Trump tariffs slam markets
Dispersion, put spreads and VKOs paid off as stocks plunged, but outlook remains wildly uncertain
US President Donald Trump’s ‘liberation day’ tariffs have thrown popular hedging strategies designed to guard against a ‘grind lower’ in equities into disarray, leaving investors grasping for other ways to protect their downside.
Investors had been piling into a slew of so-called ‘shallow hedges’, such as put spreads and volatility knockout (VKO) options, ahead of the tariff announcement on April 2.
That strategy worked well in 2022, when the S&P 500 shed almost 20% against a backdrop of low
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