Stock market tumble draws bargain hunters

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Wall Street ‘feat gauge’ jumped to a two-month high as traders lapped up defensive options

Some traders took advantage of Tuesday’s massive selloff in the U.S. stock market to go bottom fishing in stocks and options in hopes of picking up cheap upside bets on a quick market rebound.

Others, however, decided to pick up dimes in front of the proverbial bulldozer as markets sold off, though expectations of a more aggressive Federal Reserve have dampened hopes of a significant market rebound any time soon. These ranged from calls betting on the SPY shares rebounding to $380 to those looking for a move up to $405 by the end of Wednesday’s session. On Wednesday, with SPY shares about flat on the day at around $393, the trend continued with 0.7 SPY calls traded for every put.

The sudden drop in the market may have also forced options dealers to snap up call options as a way to balance the increased risk to their own books, he said

 

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