S&P 500 downside hedges fall 75% since March

Investors reduced S&P 500 downside hedging by about 75% since March, as the three-month single-stock put-call skew fell to 0.04, the fourth-lowest reading in two decades.

Data posted on social media showed the three-month put-call skew across S&P 500 single stocks at 0.04. The gauge was about 0.15 in March before declining to the current level. The drop in the single-stock skew is the steepest since the April–May 2025 period. The broader S&P 500 index put-call skew near March reached roughly 0.50.

Put-call skew compares how much traders pay for put options versus call options on the same stocks. Higher skew indicates stronger demand for downside protection; lower skew indicates reduced hedging and greater tilt toward upside exposure. A 0.04 reading suggests relatively little demand for crash protection in single-stock options.

The fall in hedging coincided with a strong run in U.S. equities. The S&P 500 hit a fresh all-time high in May and rose more than 16% since March 31. Market commentary tied part of the rally on May 21 to reports of a near-final U.S.-Iran draft brokered by Pakistan, during which roughly $500 billion flowed into U.S. equities.

The current single-stock skew is lower than levels seen during the 2021 meme-stock episode. Downside protection is cheaper now than it was at the peak of that period.

A social media post accompanying the data read, “Investors are no longer thinking about downside risk.” The post also warned that if the diplomatic framework that helped fuel the rally stalls, the resulting complacency could become a catalyst for volatility. Traders and portfolio managers use skew and option prices to gauge market sentiment and tail risks; sudden shifts in sentiment can prompt rapid position adjustments.

Background: the three-month single-stock put-call skew compares implied volatility priced into puts versus calls for individual S&P 500 constituents over a three-month horizon. Traders buy puts to hedge against large downside moves, so rising skew often reflects growing concern about declines, while falling skew indicates reduced demand for those hedges.