Hedge Pressure Gauge
Turns the market's warning signs into one easy 0-100 risk score, updated every weekday before the opening bell.
Many signals point to higher risk. Protection is worth having in place.
This week’s read
Over the last five trading days hedge pressure moved from a modestly calm tone to a high alert, with a sharp mid-period spike followed by a steady high level near 70s; risk has shifted toward defensive positioning and hedging demand remains elevated.
How the Hedge Score has moved over time. Hover the line for details on each session, and compare it with the SPY Drawdown chart below.
Historic Pressure Score Trend shows a high hedge pressure regime, with the latest composite around 71.6, signaling elevated risk and strong hedging demand. The prior day printed 70.0 plus, confirming sustained elevated risk and triggering defensive considerations. Earlier in the period, score readings in the mid-60s warned to monitor for further escalation. This shift highlights a transitioning risk environment where hedging remains a key consideration for allocations.
Introduction
This dashboard monitors key market signals to identify when hedging can protect your portfolio. Hedging acts like insurance for investments—similar to insuring your car against accidents, it safeguards against major market downturns while allowing you to stay invested and benefit from gains.
Hedging is crucial because markets are unpredictable, and sharp declines can erase years of returns. By hedging, you limit losses during tough times without selling assets (which could trigger taxes and lock in losses). Instead, you maintain exposure to upside potential while cushioning downside risk, helping you sleep better at night. The Hedge Score uses real market data to signal when this protection may be warranted.
How the Hedge Score works
| Step | Description |
|---|---|
| Track | Track data points such as volatility, options flow, credit spreads and drawdown. |
| Score | Score each chart using the formula: Score_i = 100 × (value_i - min_historical) / (max_historical - min_historical). In simple terms, this scales the current value to a 0-100 range based on its historical highs and lows. |
| Weight | Give more weight to signals that have historically done a better job of flagging market stress, so the most dependable signals have the most influence on the final score. |
| Combine | Compute a weighted average of the chart scores using the formula: Final Score = Σ (Score_i × Weight_i) / Σ Weight_i. In simple terms, this blends all the scores together, giving more reliable signals a bigger role. |
| Smooth | Apply smoothing using the exponential moving average formula: Smoothed_t = α × Raw_t + (1 - α) × Smoothed_{t-1}, where α is a smoothing factor between 0 and 1. In simple terms, this reduces sudden jumps from one day to the next. |
| Scale | Rescale and round the final value to the 0-100 Hedge Score using: Hedge Score = max(0, min(100, round(Smoothed Value))). In simple terms, this keeps the score between 0 and 100 and rounds it to a whole number. |
What the score means
| Range | Interpretation |
|---|---|
| 0-32 | Low - calm, little sign of market stress. |
| 33-56 | Moderate - watchful, some signs of worry. |
| 57-69 | Elevated - concern; consider protection. |
| 70-100 | High - danger; many signals point to higher risk. |
How to Use the Historic Pressure Score Trend
The Historic Pressure Score Trend chart above shows how the Hedge Score has evolved over time. Compare this with the SPY Drawdown chart further down the page to see how the score's signals align with market declines. When the Hedge Score rises into elevated or high ranges (57+), it often precedes or coincides with significant market pullbacks. By comparing these two charts, you can see how timely hedging notifications could have helped protect your portfolio during periods of market stress, allowing you to maintain exposure to upside potential while limiting downside risk.
Public data
All data utilized is publicly available. For further information, please visit the following pages:
| Data Source |
|---|
| Daily Treasury Yield Rates |
| Secured Overnight Financing Rate |
| CBOE VIX index |
| CBOE 3 month VIX index |
| CBOE Put/Call volume and ratios |
| SPY Chart |
Limitations
This tool is not financial advice. The Hedge Score relies on historical data and patterns, which do not predict future performance. Use it as one factor among many in your investment decisions.
Today’s Risk Drivers
Each driver scored 0–100 (higher = more stress), with the change over the last 5 sessions. Select one to jump to its chart.
- Market RegimeSPY vs long-term trend and VIX/VIX3M inversions; higher values mark bearish market regimes.91 out of 100, Extreme risk 20 up over 5 sessions
- VolatilityVIX/VIX3M ratio and slope inversions; higher means the volatility term structure is tilting defensive.90 out of 100, Elevated risk 28 up over 5 sessions
- SPY DrawdownPercentile of current SPY drawdown from highs; higher reflects deeper pullbacks.90 out of 100, Extreme risk 33 up over 5 sessions
- Options PositioningEquity put/call positioning and volatility skew; higher indicates heavier hedging.81 out of 100, Elevated risk 8 up over 5 sessions
- Safe Haven FlowsRisk-off cluster frequency (SPY down, VIX up, yields down); higher shows flight to safety.63 out of 100, Moderate risk 13 up over 5 sessions
- Credit SpreadsCorporate bond stress using high-yield and the SOFR - 3M Treasury spread; higher values signal tighter credit and funding stress.60 out of 100, Moderate risk 13 up over 5 sessions
- Yield CurveShort-term Treasury curve stress; higher values signal policy and recession worries in the front end.52 out of 100, Low risk 1 down over 5 sessions
- Market BreadthParticipation strength based on McClellan breadth; higher means fewer stocks are joining the move.48 out of 100, Low risk 1 up over 5 sessions
5-Day Stacked Breakdown
Relative contribution of each driver to the Hedge Score.
0 = calm · 100 = max stress
