Wall Street firms, including Goldman Sachs, Citadel Securities, and JPMorgan Chase, are telling clients to load up on cheap hedges as U.S. stocks trade near record highs and warning signs begin piling up.
This push for protection is happening as major indexes climb, the S&P 500 jumps 28% since April 8, and the VIX, Wall Street’s so-called fear gauge, drops to its lowest level since February.
According to Bloomberg, the combination of a calm volatility market and a strong rally is creating what trading desks see as a rare window to buy downside protection before potential shocks hit.
Goldman’s trading team said in a note on Monday, “If you are nervous, the market is making it very easy to rent hedges.” That advice is coming just days before some key events that could disrupt this calm. The Federal Reserve is scheduled to release its latest interest rate decision on July 30.
Then, President Donald Trump’s August 1 tariff deadline follows immediately after. On top of that, U.S. trade deals with Mexico and Canada are still unresolved, and any new standoff could reverse market momentum. There’s also the upcoming July jobs report, due at the end of the week, which could weigh on the Fed’s future moves.
Wall Street points trades to short-dated put options
John Tully, a strategist at BofA Securities, told clients it is time to get ahead of market volatility while it’s still cheap. In his Monday note, Tully wrote, “It’s time to buy volatility,” pointing to historical trends showing that VIX typically hits its lowest levels of the year in July.
He recommended clients pick up put options on the S&P 500 expiring on August 22, since they would still be valid during the Jackson Hole economic symposium, an event closely watched for shifts in Fed policy.
Ilan Benhamou, from JPMorgan’s equity derivatives sales team, offered a tighter timeframe. He said clients should consider put options expiring on August 1, directly tied to the same-day release of the July non-farm payrolls data and Trump’s tariff announcement.
Both events, happening within hours of each other, could force markets into sudden moves, and Benhamou’s pitch was aimed at catching those reactions with precision.
While some traders expect this rally to extend further, others are already flagging the risk of overexposure. Scott Rubner, who leads equity and derivatives strategy at Citadel Securities, told clients that systematic funds are now approaching their limit on long exposure. If they pull back, that could drain momentum from the rally.
September hedges pushed as longer-term protection
Rubner isn’t stopping at August. He’s also advising clients to look at September-dated hedges. He said macro events expected around that time could weigh heavily on risk assets. There’s also the historical trend: since 1928, September has been the worst-performing month for U.S. equities. That data point is being used by desks to make the case that cheap hedges today could pay off if volatility reawakens during the historically rough month.
Rubner also said that retail traders are one of the only buyer groups still supporting the rally. If that support fades, and there’s no Fed rate cut or earnings surprise to sustain momentum, the market could reverse fast. Tully added that if the Fed doesn’t see tariffs as inflationary or growth-killing, there’s a chance it cuts rates in September, which would extend the rally, but there’s no guarantee of that happening.
Meanwhile, Big Tech earnings, especially from companies like Nvidia, haven’t yet landed. Depending on the results, the market could swing hard in either direction.
