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Analysis: As investors look to Jackson Hole, options markets see 'a lot of nothing'

Traders in U.S. equity options do not expect the Federal Reserve’s symposium in Jackson Hole, Wyoming later this month to spark big moves in stocks, even as a focus on the Fed’s taper timeline amplifies the buzz around the annual event, data and interviews with market participants showed.

Investors typically place bets, or hedges, that would protect their portfolios around events that could generate market volatility.

While there has been some hedging demand ahead of Jackson Hole, it pales in comparison with what was seen in the run-up to potentially consequential events in the recent past, such as last year’s presidential election, the Georgia Senate runoffs earlier this year and the Fed’s last monetary policy meeting, a Reuters analysis showed.

Strategists gave several reasons why investors have gone lighter on protection against market swings that could occur around the Aug. 26-28 symposium, where some believe Fed Chair Jerome Powell may give insight on plans for tapering the $120 billion-a-month government bond buying-program that has helped fuel the S&P 500’s double from its March 2020 lows.

One possibility is timing. Some investors believe the Fed will want to see more data before announcing taper plans, making the central bank’s September meeting a more likely date for outlining a possible unwind.

Reference: Reuters