Here’s Why Stocks Haven’t Dropped Off Even More Steeply

Theodora Lee Joseph

2 months ago1:25 min

Here’s Why Stocks Haven’t Dropped Off Even More Steeply

The S&P 500 is down 24% this year, and while that may seem steep, the fall actually could have been much worse. In fact, asset insurance has been a sort of hidden hero, preventing a more painful selloff. These inexpensive insurance contracts, more commonly known as “put” options, give investors the option to sell an asset at a guaranteed price (strike price) when market prices move lower. And they do their best work in times like these – when market prices are falling.

With the market heading south, many hedge funds have chosen lately to exercise their contracts. This in turn has helped prop up their returns and prevent a sharper market selloff. It also explains why the market’s decline has been more measured, spread out over a few months as opposed to weeks. Historically, investors have

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