Stock Market Disaster Hedges Are the Cheapest in Nine Years

Buying options to protect against a stock market plunge is the cheapest in nine years.

As the Cboe Volatility Index — or <-rte-company state="{"_id":"0000018f-5392-d4b6-a98f-f7b7acdf0000","_type":"00000160-4b23-d8bd-adfd-4b3348fd0000"}">VIX-rte-company>, which measures expected swings in equity markets — sank over the past couple weeks, so did an index tracking the implied volatility of VIX options, known as the <-rte-company state="{"_id":"0000018f-5392-d4b6-a98f-f7b7acdf0001","_type":"00000160-4b23-d8bd-adfd-4b3348fd0000"}">VVIX-rte-company>. The VVIX finished Monday’s session just above 73, its lowest closing value since May 2015. Early in Tuesday’s session, the index advanced only slightly, holding well below its one-year average of 89.

The lower the implied volatility, the cheaper the options. So the drop in …