The stock market is hitting record highs, and investors are acting like they do not need a safety net anymore.
Demand for protection against a stock decline has fallen to its lowest level since President Donald Trump's tariff retreat last year. The shift is a clear signal that the people managing money are now more worried about missing out on gains than they are about getting hurt by a sudden drop.
When investors get nervous, they buy something called puts, which are contracts that pay off if a stock falls. Think of them as insurance policies for your portfolio. When investors feel confident, they buy calls instead, which profit when a stock rises.
Right now, the insurance side is out of fashion. The one-month put-to-call skew on the S&P 500 Index, a measure of how much investors pay for downside protection relative to upside calls, dropped to its lowest level since April 2025. That is a fancy way of saying investors are not paying up for protection anymore.
The pattern first appeared after stocks jumped on Aug. 4 and has returned this week, according to data compiled by Bloomberg.
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The April 2025 comparison matters: that was the last time hedge demand was this low, and it came after President Donald Trump's tariff retreat last year. Now, with the S&P 500 at record highs, traders are again treating pullbacks as buying opportunities rather than reasons to hedge.
In a Monday client note, Mandy Xu, who oversees derivatives market intelligence at Cboe Global Markets Inc., said, "Investors sold out of hedges and rotated into upside calls to chase the rally."
Christopher Jacobson, who co-leads derivative strategy at Susquehanna International Group, saw the same thing from his side of the market. "Skew shifted fairly notably on a week over week basis; away from the downside puts and toward the upside calls," he said.
Jacobson also noticed something interesting about who is doing the buying. Investors who may have been "underweight" stocks last week, meaning they held less stock than their benchmark suggests they should, used call options to "regain upside exposure." In other words, they wanted back in, and they wanted in fast.
Buying calls lets you get exposure to a rising market without putting up the full cost of buying the stock itself. It is a way to chase performance when you feel like you are falling behind.
Here is the thing about a market where everyone feels safe. It is exactly when the crowd gets comfortable that the risk of a sudden turn tends to show up.
The fact that hedge demand is this low does not mean a drop is coming. When everyone is leaning the same direction, there is less buying power left to catch a falling market, and that can make any pullback feel sharper.
For your own portfolio, the takeaway is not about predicting the next move. It is about noticing the mood. When the people who manage big money stop buying insurance, they are making a bet that the good times keep rolling. That bet has worked out so far, with indexes at record highs.
But markets have a way of reminding people why insurance exists in the first place. The question is not whether you should buy puts or calls. It is whether you have a plan that works whether the rally keeps going or the safety net suddenly looks cheap again by August 10, 2026.
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