Real-Time Hedging Signals to Protect Your Portfolio
Free email hedge alerts to help investors manage market risk in real time.
Hedge Pressure Gauge
Turns the market's warning signs into one easy 0-100 risk score, updated every weekday before the opening bell.
This chart serves as a backtest of the Hedge Pressure indicator, showing its historical evolution over the displayed timeline.
Historic Pressure Score Trend tracks hedge pressure on a 0-100 scale; the latest composite is 29.74, showing low-to-moderate hedge pressure. The week included a prior spike to 52.3 on 1/20, indicating a brief stress event, followed by a retreat into the 26-30 zone. The current pace is stable with only small daily declines, signaling no urgent hedging push. Monitoring remains important as any renewed price stress could lift the score toward the moderate range. Overall, risk posture now sits in the calm-to-moderate area rather than elevated danger.
Threshold Lines
- Extreme (90th)69.33
- Elevated (75th)56.97
- Median (50th)41.58
- Low (25th)33.05
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 | Assign higher weight to signals that have been more reliable historically. For example, a signal that's been right 80% of the time gets more influence than one that's only right 50% of the time. |
| 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.
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SPY Drawdown
This shows how much the S&P 500 stock index (SPY) has fallen from its highest point recently. Bigger drops often happen when investors are hedging aggressively.
Market & Regime Overview
SPY price action alongside the VIX term-structure ratio. Shaded zones highlight inversions (ratio > 1.0) where hedge demand typically accelerates.
Term Structure Crossover
This shows the current stock market fear gauge (VIX) compared to the 3-month fear gauge (VIX3M). Watch when the current fear gauge goes above the 3-month fear gauge - this signals market stress. The spread line shows when they cross.
VIX/VIX3M Ratio Bands
This chart shows the ratio of the current fear gauge (VIX) to the 3-month fear gauge (VIX3M) with a smoothed line and warning levels. The bands mark when to be careful (0.90), when hedging increases (1.00), and when there's real stress (1.10).
Term Structure Slope (%)
This calculates the percentage difference between the 3-month fear gauge (VIX3M) and the current fear gauge (VIX). When it stays negative, the fear curve is upside down, meaning short-term fear is higher than long-term fear, and hedging pressure is rising.
Put/Call Ratio (5-day avg)
This chart tracks the ratio of put options (insurance against stock drops) to call options (bets that stocks will go up) on stocks, plus its average over 5 days. Higher numbers mean investors are buying more insurance to protect against stock drops.
CBOE SKEW Index
This chart uses the SKEW index from the Chicago Board Options Exchange to measure how much investors want protection against big market crashes. Higher numbers mean more demand for crash protection options.
VIX & Term Structure
This chart combines the current stock market fear gauge (VIX), its average over 50 days, and the ratio between the fear gauge and the 3-month fear gauge (VIX3M). It helps spot when stock market fear is changing quickly, which can make investors want to hedge their bets.
Credit & Liquidity Stress
This chart shows two key measures of credit stress in the economy. The high-yield spread shows how much extra companies pay to borrow money compared to Treasury bonds. The SOFR (Secured Overnight Financing Rate) minus 3-month Treasury spread shows banking system stress - SOFR is the benchmark rate for dollar-denominated derivatives and loans. When these spreads widen, it indicates increased risk and uncertainty in financial markets.
Short-Term Treasury Curve Stress
This tracks short-term Treasury rates: 3-month and 2-year yields, plus the difference between them. It highlights stress in short-term borrowing and lending.
Long-Term Treasury Curve Stress
This compares long-term Treasury bond rates: 30-year and 10-year yields, plus the difference between 10-year and 2-year rates. It helps spot big, long-term risks in the market.
SPY vs Key Moving Averages
This chart compares the S&P 500 stock index (SPY) price to its averages over 50 and 200 days. It helps understand if the stock market trend is under stress, which affects hedging decisions.
Risk-off Cluster Count (20d)
This counts how many days in the last month the stock market (SPY) went down while the fear gauge (VIX) went up and long-term interest rates went down. This pattern shows investors are running to safe investments.