Investors size up put options as data points to market correction

Managers are setting up portfolios for a pull-back in equity markets, looking at put options and moving more defensive as several indicators post sell signals.

Senior equity investors are considering buying portfolio insurance or even shorting the FTSE following a rally which has seen the index rise 7% since the start of 2013. Eric Moore, co-manager of Bill Mott’s PSigma Income fund, said the rally has not been supported by earnings upgrades, so the PSigma team is sticking with a relatively defensive stance and may buy portfolio protection. “Buying insurance is relatively cheap at the moment as volatility is low, and we have talked about it. We have not implemented as yet as we are not trying to second guess the markets too much. It could be...