From Barrons: Investors are quietly building defensive options positions as the stock market hovers around all-time highs. The "greed-in" and "risk-on" trade still dominates, but a nascent change is occurring as key market risks, particularly the threat of sequestration, loom menacingly ahead.
With the Standard & Poor's 500 inhaling thin oxygen around 1500, investors are bearishly positioning in financial and small-company stocks that have reacted poorly to Europe's economic and political unrest and the U.S. economy's malaise. Investors are buying puts, often in large size, on the Select Sector SPDR-Financial (XLF) and the iShares Russell 2000 Index (IWM). If stocks slide, they could force the parties on the other side to buy these exchange-traded funds at prices higher than those they'd be trading at.
….True, the defensive trading is thus far isolated and controlled, but it has occurred in such large size as to cause some investors to wonder if the stock market is too far ahead of itself, given what might be waiting at month's end….
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