A giant JPMorgan fund just reset its hedging strategy. What it did and what it means.

By Steve Goldstein

The so-called options whale has made its trade.

A big JPMorgan fund reset a hedging strategy in a move that could impact the broader stock market at the end of the year.

The JPMorgan Hedged Equity Fund JHEQX, with $21 billion in assets, implemented its put-spread collar, which involves buying a put that's out of the money, also selling a put that's out of the money, while simultaneously selling a call that's out of the money.

It sounds complicated, but all it means is that the fund is hedging downside risk, by giving up some upside. The fund usually underperforms during good times - it trailed the S&P 500 in 2023 and 2024 - but outperforms doing bad times, as it lost 8% vs. the 18% loss for the index in 2022.

This year the fund is up 4% vs. the 14% rise for the S&P 500.

According to options dealers, the fund set a put spread between 5,340 and 6,330 while selling a call at 7,000. The S&P 500 SPX closed the third quarter at 6,688.46.

The fund's strategy often has an impact on markets at the end of a quarter, as dealers take the other side of the trade.

Read earlier story: Why the 'JPMorgan options whale' can help the stock market over the next week

-Steve Goldstein

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