Investors Cut S&P 500 Downside Hedges 75% Since March

Investors have reduced S&P 500 downside hedges by about 75% since March as the three-month single-stock put-call skew dropped to 0.04, a level that ranks among the four lowest readings in the past 20 years. The decline is the steepest for the gauge since April–May 2025.

The skew moved from roughly 0.15 in March to 0.04 in recent sessions, according to data compiled by a market newsletter. The broader S&P 500 index put-call skew had reached almost 0.50 in March, reflecting higher demand for put options at that time.

The put-call skew measures how much more traders pay for put options than for calls on individual S&P 500 stocks. Higher skew values indicate greater demand for puts and more bearish positioning; lower values indicate reduced demand for downside protection. At 0.04, the single-stock skew points to very little demand for crash insurance.

The reduction in hedging costs occurred alongside a sustained rally in U.S. equities. The S&P 500 rose more than 16% since March 31 and recorded a fresh all-time high in May. Market flows reacted on May 21, when reports of a near-final U.S.-Iran draft agreement corresponded with about $500 billion moving into U.S. stocks that day.

The newsletter posted on social media: “Investors are no longer thinking about downside risk.” It also noted that if the reported diplomatic framework does not advance to a signed agreement, market participants could reassess risk exposures.

The current skew level is lower than readings seen during the 2021 meme-stock episode and reflects a marked reduction in demand for single-stock put hedges compared with earlier this year. Changes in options skew can move more quickly than prices because option costs reflect shifting sentiment and risk expectations among institutional and retail traders.