Options Market Hedging Limits Selloff Impact

The Long View, institutional investor, posted on X that investors have maintained strong hedging positions in the options market, with the short put delta held by customers reaching nearly -$70 billion, marking a historical extreme. This robust hedging has contributed to limiting the selloff at the index level, with the S&P 500 experiencing a peak-to-trough decline of only 5% and a two-week realized volatility just under 12%. However, $20 billion of this short delta is set to expire this Friday during the March options expiration (OPEX). Despite this expiration, hedge balances will remain substantial, as positioning is expected to decrease only slightly from the 100th percentile to the 99th percentile.