The S&P 500 Index ($SPX) has been hitting new record highs, recently closing above 6,400 for the first time ever. But beneath the celebration of all-time highs lies a quieter signal: the Cboe Volatility Index ($VIX) recently slipped below 15, hitting its lowest level of the year.

That combination of soaring stock prices and historically cheap options premiums has seasoned traders like John Rowland, CMT, thinking about hedging.

Why the Low VIX Makes Hedging Attractive

The VIX is often called the market’s “fear gauge.” When it’s low, that means investors are relatively complacent, and option premiums (particularly puts) are inexpensive. 

For long-term investors, that means insurance in the form of put hedges is on sale.

As John put it in the August 15 episode of Market on Close:

“We’re perched at all-time highs, VIX is below 15, and puts are cheap. The market is screaming that it’s probably prudent to do some type of hedging.”

John’s Example Hedge Strategy

John highlighted a protective collar strategy on the SPDR S&P 500 ETF (SPY):

1. Sell a $660 call
2. Buy a $620 put

This trade sets a ceiling on upside at $660 while providing downside protection if prices fall below $620. It’s essentially a way to stay invested, while still guarding against a correction.

Why Hedging Matters Now

Several macro factors support taking a cautious stance:

• Slowing Growth & Rising Inflation – Tariffs are gradually pushing prices higher, with core CPI ticking up to 3.1% year-over-year.
• Seasonal Weakness – August–October is historically one of the most volatile stretches of the year.
• Fed & Policy Uncertainty – With inflation pressures building, the Federal Reserve has reason to stay cautious, leaving markets vulnerable to policy surprises.

These headwinds could create turbulence even within a long-term bull market.

Alternative Hedge Tools

For traders who want flexibility beyond options, inverse ETFs provide downside exposure to the S&P 500 (SPXS), Nasdaq (SQQQ) and other assets with leverage and without using options contracts. 

Note that these are best reserved for trading professionals, and not intended to be held as long-term investments. 

You can explore ETFs based on index groups and investing strategies using the ETF Finder at Barchart.

The Takeaway

Markets may continue climbing — but when insurance is this cheap while risks are building, it’s smart to think about hedging. Whether through a SPY collar strategy or an inverse ETF, the goal is the same: stay invested while guarding against the unexpected.

Watch the quick breakdown with John Rowland, CMT, here: