Wall Street Touts ‘Grind Lower’ Trades as Iran Weighs on Stocks

As the Iran war heads into a fifth week, Wall Street bank strategists have been touting trades that would pay off if a stock-market selloff is slow and steady.

BBVA recently recommended April Euro Stoxx 50 Index put spreads, citing market complacency even in the face of a US troop buildup, while JPMorgan Chase & Co. mentioned activity in over-the-counter volatility “knock-out” puts where protection evaporates if market swings exceed a certain level. Both kinds of strategies lower the cost of the option positions compared with just buying vanilla puts.

The lack of immediate macroeconomic shock has so far kept ...