Emerging Market Hedging Prices Jump Amid Europe Infection Concern: Options |
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September 29, 2011
The price of options to protect against losses on equities from China to India and Brazil has surged to its highest since 2009 relative to U.S. contracts.
The price of options to protect against losses on equities from China to India and Brazil has surged to its highest since 2009 relative to U.S. contracts.
The spread between implied volatility for three-month options on the iShares MSCI Emerging Markets Index and the SPDR S&P 500 ETF Trust (SPY) has doubled to 13.19 this month. It reached 14.92 on Sept. 26, the highest level since June 2009, data compiled by Bloomberg show.
Investors are trying to lock in gains after the emerging markets gauge rallied 84 percent since March 9, 2009, beating the Standard & Poor’s 500 Index by 13 percentage points. They’re hedging even after Mohamed El-Erian of Pacific Investment Management Co., which runs the world’s biggest bond fund, said on Sept. 24 that emerging economies will “maintain faster growth” as the global economy slows.
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