STOCKS | Kospi 200 Put-Call Positioning Near Levels That Previously Preceded Declines

Put option positioning on South Korea’s Kospi 200 has risen sharply relative to calls, nearing levels that previously signaled potential market declines. According to Jin10, as of the previous trading session’s close, the ratio of protective puts used to hedge downside risk to speculative call positions was close to 2.5, the highest level in five years. The indicator has only reached this threshold a few times in the past. After the ratio moved above 2.5 in July 2007, the Kospi 200 fell nearly 17% over the following month. When it crossed that level again in January 2021, the index dropped more than 5% within three weeks. The report said the South Korean stock market’s earlier strong rally has started to lose momentum. Investors have become more cautious toward artificial intelligence-related stocks, citing concerns that persistent inflation could keep interest rates higher for longer. Arun Singh, chief executive officer of Indicus Capital, said the shift in the put-call ratio further suggested that global momentum trading was cooling, noting that South Korean equities had been deeply involved in the momentum-driven move. He added that even at current levels, it was reasonable to hedge and protect existing gains, particularly as interest-rate and inflation expectations were being repriced.