--- title: "Wall Street Abandons Safe Haven Hedges as Most Shorted Stocks Surge 30% in Two Months" type: "News" locale: "en" url: "https://longbridge.com/en/news/288121955.md" description: "The S&P 500 notched its ninth consecutive weekly gain, marking the longest streak since 2023, while Goldman Sachs' basket of heavily shorted stocks soared more than 30% over the past two months. The cost of hedging against downside risk has fallen to its lowest level this year as capital frenziedly engages in FOMO buying of AI call options. Analysts point out that investors who were previously underweight equities are now being forced into FOMO buying to cover their exposure" datetime: "2026-05-29T22:22:40.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/288121955.md) - [en](https://longbridge.com/en/news/288121955.md) - [zh-HK](https://longbridge.com/zh-HK/news/288121955.md) --- # Wall Street Abandons Safe Haven Hedges as Most Shorted Stocks Surge 30% in Two Months As risky assets rally across the board, caution itself has become Wall Street's most expensive liability. The S&P 500 extended its winning streak to nine consecutive weeks this week, setting the longest such run since 2023 and refreshing historical highs. Meanwhile, junk bonds strengthened, oil prices slid toward their worst monthly performance since 2020, and the cost of hedging against downside risk dropped to its lowest point this year. The basket of shorted stocks compiled by Goldman Sachs surged more than 30% in the past two months, inflicting heavy losses on short sellers. The driving force behind this rally is less about investor confidence in the outlook and more about "fear of missing out" (FOMO) spreading at a higher cost. Investors who remained skeptical and underweight equities in recent months are now facing pressure from passive underperformance, forcing them into FOMO buying to cover their exposure. In the options market, the cost of protecting against declines continues to slide, while demand for bets on upside potential remains elevated. Barclays noted that while hedge funds and trend-following funds have rebuilt their equity exposures, the buying momentum from long-term capital has cooled, retail participation remains low, and significant cash reserves remain on the sidelines. Although certain segments of the market appear crowded, it is still some distance from a "full-scale entry." ## Hedging Costs Fall to Year-to-Date Lows The price of downside protection is dropping to levels rarely seen in the market. The cost of hedging against ordinary declines has fallen to its lowest since early 2025, while the cost of tail-risk insurance against extreme crash scenarios has also retreated to year-to-date lows after a brief spike. The "Skew," which measures the premium investors pay to protect against sharp drops, has slipped back to January 2025 levels. Amy Wu Silverman, Head of Derivatives Strategy at RBC Capital Markets, stated: > "Many people believe that even if a correction occurs, capital will immediately buy the dip. The old saying goes, 'Hedge when you can, not when you have to.' The problem is that skew looks cheap already, but it continues to decline." This de-hedging trend is occurring precisely as economic data weakens: consumer confidence is down, income growth is slowing, and new home sales declined in April. Nevertheless, the stock market closed at historical highs amid reports of a US-Iran agreement—although Trump himself has yet to confirm the deal. Michael O'Rourke, Chief Market Strategist at JonesTrading, pointed out: > "The core logic of the market's bet is that Trump does not wish to get re-involved in large-scale combat operations. If the deal falls through, the market will simply wait for the next round of negotiations. Only if Trump restarts major military actions, or if oil prices surge significantly, will the market react negatively." ## Semiconductor Options Demand Extremely Skewed Toward Calls The direction of capital flows is clear: spending on downside protection is decreasing, while the cost of betting on upside is being driven higher. Data from Nomura Holdings shows that options positions in the $68 billion VanEck Semiconductor ETF exhibit extreme demand for upside exposure—even after the rally has fully played out, investors are still paying abnormally high premiums for out-of-the-money call options. According to SpotGamma statistics, among the top 25 companies by market capitalization on the Nasdaq, 20 have call option prices in the top 10th percentile of their historical range, marking the first time such concentration has appeared since June 2024. Chris Murphy, Co-Head of Derivatives Strategy at Susquehanna International Group, stated: > "Traders are clearly chasing upside protection, but this is not indiscriminate buying of call options. Rather, investors who were underweight in the AI-driven rally are buying up exposure to hedge against tail upside risks. My judgment is that investors are no longer just hedging against downside risk—many are hedging against the risk of missing the next leg up." For the trading desks pricing these transactions, this wave of buying looks more like catch-up positioning rather than a signal of market frenzy: fund managers who were previously skeptical of the rebound are buying back exposure they never held in the first place. ## Multi-Asset Sentiment Improves, Oil Prices Drop, US Treasury Yields Decline This shift in sentiment is not limited to the stock options market but extends across nearly all risky asset classes. In credit markets, corporate bond spreads continue to narrow, approaching multi-decade lows, while junk bonds continue to rise. In commodity markets, Brent crude fell to $92 per barrel, and volatility declined synchronously across almost all asset classes. US Treasuries benefited from falling oil prices and eased inflation concerns, leading to lower yields. The pain is concentrated among short sellers. The basket of most heavily shorted stocks tracked by Goldman Sachs has cumulatively risen more than 30% over the past two months, causing heavy losses for any positions betting on a reversal. This week, a hotter-than-expected inflation data point pushed the annual inflation metric to a nearly three-year high, military strikes reappeared in the Persian Gulf region, and expectations remain that the Federal Reserve may need to maintain policy tightness—yet none of these factors have managed to halt the upward momentum of risky assets. ### Related Stocks - [GS-A.US](https://longbridge.com/en/quote/GS-A.US.md) - [GS.US](https://longbridge.com/en/quote/GS.US.md) - [GS-D.US](https://longbridge.com/en/quote/GS-D.US.md) - [GS-C.US](https://longbridge.com/en/quote/GS-C.US.md) - [.SPX.US](https://longbridge.com/en/quote/.SPX.US.md) - [SCHG.US](https://longbridge.com/en/quote/SCHG.US.md) - [IUSG.US](https://longbridge.com/en/quote/IUSG.US.md) - [QQQ.US](https://longbridge.com/en/quote/QQQ.US.md) - [MGK.US](https://longbridge.com/en/quote/MGK.US.md) - [VUG.US](https://longbridge.com/en/quote/VUG.US.md) - [UPRO.US](https://longbridge.com/en/quote/UPRO.US.md) - [IVV.US](https://longbridge.com/en/quote/IVV.US.md) - [IWF.US](https://longbridge.com/en/quote/IWF.US.md) - [VFH.US](https://longbridge.com/en/quote/VFH.US.md) - [XLF.US](https://longbridge.com/en/quote/XLF.US.md) - [FNCL.US](https://longbridge.com/en/quote/FNCL.US.md) - [SPXS.US](https://longbridge.com/en/quote/SPXS.US.md) - [VOO.US](https://longbridge.com/en/quote/VOO.US.md) - [IAI.US](https://longbridge.com/en/quote/IAI.US.md) - [SPY.US](https://longbridge.com/en/quote/SPY.US.md) - [BCS.US](https://longbridge.com/en/quote/BCS.US.md) - [RY.US](https://longbridge.com/en/quote/RY.US.md) - [NMR.US](https://longbridge.com/en/quote/NMR.US.md) - [SMH.US](https://longbridge.com/en/quote/SMH.US.md) - [.IXIC.US](https://longbridge.com/en/quote/.IXIC.US.md) - [W4VR.SG](https://longbridge.com/en/quote/W4VR.SG.md) - [BARC.UK](https://longbridge.com/en/quote/BARC.UK.md) - [8604.JP](https://longbridge.com/en/quote/8604.JP.md) ## Related News & Research - [Goldman Sachs lifts S&P 500 target to 8,000 on earnings strength](https://longbridge.com/en/news/287893383.md) - [HEDGE FLOW-Hedge fund tech positions hover near record highs, Goldman Sachs says](https://longbridge.com/en/news/287511105.md) - [A Look At Goldman Sachs Group (GS) Valuation As SpaceX And OpenAI IPO Roles Draw Focus](https://longbridge.com/en/news/287550922.md) - [Delta Asset Management LLC TN Has $68.42 Million Holdings in The Goldman Sachs Group, Inc. $GS](https://longbridge.com/en/news/287454510.md) - [The Goldman Sachs Group, Inc. $GS Shares Purchased by Allstate Corp](https://longbridge.com/en/news/287594537.md)