Sell in May?
Time for May hedges
Equity investors are underestimating the effects of post-Covid inflation on the market, incorrectly assuming a recession is priced in, and overvaluing the Fed's ability to rescue the economy and financial markets during stress. However, option markets provide a favorable opportunity to incorporate US equity hedges. Volatilities have crashed lately (more here) and BofA sees attractive pricing of downside hedges (we agree, and skew works in your favor). They recommend the SPY May 395/405 put spread (approx 6x max payout). This expiry gives you the FOMC, most earnings and some other important stuff...
