Risk of 10% Stock Slide Tripled in a Month, Goldman Sachs Says

(Bloomberg) The risk of a 10 percent stock slide by April tripled in a month, options prices show, amid rising oil prices that threaten the economic recovery and Japan’s biggest earthquake, Goldman Sachs Group Inc. said.

Standard & Poor’s 500 Index options show that traders are betting that it has a 6 percent chance of losing 10 percent over the next month, up from a 2 percent probability a month ago, equity derivatives strategists Krag “Buzz” Gregory and John Marshall wrote in a report yesterday. The VIX, a gauge of prices for options on the equity benchmark, is up 39 percent from last month’s low.

Investors are boosting the price of protection as crude oil climbed to a 29-month high this month amid fighting in Libya and Japan’s 8.9-magnitude earthquake and subsequent tsunami killed thousands, the New York-based strategists wrote. Traders see more “tail” risk, or a higher chance that a lower-probability event could erase a tenth of stock-market value. ...........(more)

The complete piece is at: http://www.bloomberg.com/news/2011-03-14/risk-of-10-stock-slide-tripled-in-a-month-goldman-sachs-says.html

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The options market reflects what investors think - not brokerage houses.

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