Key facts
- Options market indicators suggest increasing market fragility.
- A volatility shock or sharp pullback is possible despite the rally.
- Skew and correlation metrics are cited as warning signs.
- Investors are reportedly forsaking hedges and positioning for further upside using options.
Despite a nine-week rally in the S&P 500, individuals who monitor key options metrics are signaling that the market may be becoming more fragile. Indicators such as skew and correlation are pointing towards an increased susceptibility to volatility spasms and a potential sharp pullback. These signs suggest that the current upward trend might be unsustainable and ripe for a reversal. The options market shows investors are reportedly forsaking hedges and focusing on using options to position for further upside.
