Bargain-hunting equity hedgers turn to FX

Currency options are cheap relative to stock index puts, but correlations are uncertain

Equity investors that can’t stomach the inflated cost of stock index puts are turning to the foreign exchange options market in search of a cheap hedge.

The question facing the bargain hunters is whether the bargain offsets can be relied on during the next equity meltdown – but FX markets have other advantages that are currently attracting interest.

“Relative to all other markets, FX is still somewhere you can get a large size done. If you have a big portfolio and you want a lot of protection