Macro Hedge Funds Play Index Versus Index in Niche Option Trades

Investors with less appetite for outright bets are looking to niche corners of the derivatives space to wager on one market against another.

Relative value plays are bets that spreads between indexes will blow out or narrow in sharply based on factors such as geopolitics and economic data. For cross-asset investors, dual digital — or binary — options give the chance to wager on things like the S&P 500 Index rising against the euro-dollar rate falling. Within the stock market, outperformance option contracts are a popular way to bet on one benchmark gauge against another, say the S&P 500 versus ...