Betting Against the Federal Reserve Will Cost You a Lot

Protecting against financial sector volatility could cost you as investors become less convinced the Fed will raise rates soon.
By Kinsey Grant ,

As investors sought to hedge their bets on increasing speculation that the Federal Reserve won't increase rates anytime soon, options to protect against volatility in financial stocks reached their most expensive levels since January when compared to the broader market, according to data from Bloomberg.

The Financial Select Sector SPDR ETF (XLF) - Get Report dropped 2.7% last week as one-month implied volatility for the fund surged 26%. That increase in financial sector volatility was the most among industry groups, according to the data.

Overall equities market volatility, as measured by the CBOE Volatility Index I:VIX , decreased 2.7% Monday morning as Hurricane Irma lost strength and North Korea refrained from testing any new nuclear missiles on the 69th anniversary of the country's founding. Market volatility had risen nearly 11% last week as investors braced for more serious damage from Irma, which was downgraded to a Category 1 hurricane early Monday.

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