Insulating portfolios with index options during stormy weather

Gateway market perspective

Market volatility experts from Gateway Investment Advisers, specialists in options-based investment strategies, examine key volatility trends each month and risk management ideas to help investors stay invested for the long run.

April 2025 highlights:

• In April, volatility spiked to crisis-like levels following the Trump administration’s “Liberation Day” tariff announcement, sparking concerns about global growth, inflation and potential stagflation. 
• As such, equity markets dropped sharply, and the S&P 500^® Index entered correction territory, declining 11.19% from the beginning of the month through April 8.
• As economic uncertainty and market turmoil increased, implied volatility – as measured by the Cboe^® Volatility Index (the VIX^®) –  spiked and reached a 2025 closing high of 52.33 on April 8, its highest close since 2020.
• Crisis-like volatility, however, does not necessarily lead to negative returns, although it is a possibility. 
• Key takeaways: The year-to-year unpredictability of the equity market is a reminder of the benefits of hedging volatility with Gateway's active options-based strategies: 
  • These tools benefit from heightened levels of volatility and can result in significant loss mitigation during turbulent markets. 
  • Premiums collected from index option writing can help investors consistently maintain exposure to the long-term growth potential of the S&P 500^® Index, regardless of current market direction. 
  • This balance can insulate portfolios during stormy weather and help investors stay invested for the long term.