Wall Street Traders Scoop Up Cheap Stock Hedges as Volatility Storm Looms

Brace for impact—smart money's building bunkers.

Hedging on a Budget

While Main Street piles into meme stocks, institutional players are quietly loading up on discounted portfolio insurance. VIX-linked derivatives and put spreads are trading at fire-sale prices—for now.

The Calm Before the Storm

Market complacency metrics hover near yearly lows despite geopolitical powder kegs and an overheated tech sector. 'Everyone's long until they're not,' quips a CBOE floor trader stacking puts like sandbags before a hurricane.

Bonus Reality Check

Because nothing says 'healthy markets' like billionaires playing financial Tetris with other people's retirement funds.

Wall Street points trades to short-dated put options

John Tully, a strategist at BofA Securities, told clients it is time to get ahead of market volatility while it’s still cheap. In his Monday note, Tully wrote, “It’s time to buy volatility,” pointing to historical trends showing that VIX typically hits its lowest levels of the year in July.

He recommended clients pick up put options on the S&P 500 expiring on August 22, since they WOULD still be valid during the Jackson Hole economic symposium, an event closely watched for shifts in Fed policy.

Ilan Benhamou, from JPMorgan’s equity derivatives sales team, offered a tighter timeframe. He said clients should consider put options expiring on August 1, directly tied to the same-day release of the July non-farm payrolls data and Trump’s tariff announcement.

Both events, happening within hours of each other, could force markets into sudden moves, and Benhamou’s pitch was aimed at catching those reactions with precision.

While some traders expect this rally to extend further, others are already flagging the risk of overexposure. Scott Rubner, who leads equity and derivatives strategy at Citadel Securities, told clients that systematic funds are now approaching their limit on long exposure. If they pull back, that could drain momentum from the rally.

September hedges pushed as longer-term protection

Rubner isn’t stopping at August. He’s also advising clients to look at September-dated hedges. He said macro events expected around that time could weigh heavily on risk assets. There’s also the historical trend: since 1928, September has been the worst-performing month for U.S. equities. That data point is being used by desks to make the case that cheap hedges today could pay off if volatility reawakens during the historically rough month.

Rubner also said that retail traders are one of the only buyer groups still supporting the rally. If that support fades, and there’s no Fed rate cut or earnings surprise to sustain momentum, the market could reverse fast. Tully added that if the Fed doesn’t see tariffs as inflationary or growth-killing, there’s a chance it cuts rates in September, which would extend the rally, but there’s no guarantee of that happening.

Meanwhile, Big Tech earnings, especially from companies like Nvidia, haven’t yet landed. Depending on the results, the market could swing hard in either direction.

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