The Value Proposition of Options Based Left Tail Hedging Strategies

Options based left tail hedging strategies offer a valuable value proposition. The premium for these strategies is currently compared to historical norms, making it a good time to buy insurance. The volatility premium is at multi-year lows, indicating low costs. The CBOE volatility skew is trading at the upper boundaries, showing the existence of option left tail skew. Buying left tail insurance can be more costly, but there are strategies to overcome this. Additionally, interest rates are driving an additional discount, making put options cheaper. This makes buying downside hedges even more attractive.