CME: E-Mini S&P 500 Options ( 
ES1!)
Stock investors have a unique way of celebrating the holiday season. The “Santa Claus Rally” refers to the market typically trending up between the last five days of the year and the first two of the new year — in this case from Dec. 24, 2025, until Jan. 5, 2026.
The year-end stock market surge has indeed arrived. Major U.S. indexes climbed for a fifth straight session on Wednesday. The S&P 500 closed up 0.3% and posted a fresh record of 6,932.05, and the Nasdaq Composite gained 0.2%, settling at 23,613.31. The Dow Jones Industrial Average gained 288.75 points, or 0.60%, and also posted a closing record of 48,731.16.
On Tuesday, the Commerce Department announced the third-quarter U.S. GDP at 4.3%, surpassing the market consensus of 3.2%. After the GDP report, fed funds futures trading indicates two Fed rate cuts in 2026, according to the CME FedWatch Tool.
Behind the scenes, “Smart Money” has quietly turned bearish on the stock market. CFTC’s Commitments of Traders (COT) report shows that, as of December 16th, CME E-Minis S&P 500 futures have total open interest (OI) of 2,466,313 contracts.
• “Leveraged Funds” hold 218,923 Long positions, 608,090 Short positions and 149,554 in spread positions.
• The long/short ratio of 1-to-2.8 shows that “Smart Money” manager to stay sober while retail investors are drinking cocktail.
Apollo Switches Off the Risk Button
On Tuesday, Apollo Global Management, a giant alternative asset manager with nearly $1 trillion in assets under management, announced a strategic shift toward capital preservation, liquidity buildup, and risk reduction. Apollo cites economic uncertainty, inflation, geopolitical risk, and lofty valuations as driving forces behind its actions.
In my opinion, Apollo’s repositioning signals not just a tactical change at one firm, but a broader inflection point in investment strategy among institutional investors.
This also illustrates the importance of the COT report as a leading indicator. You could spot big moves by the institutional investors weeks before they make them public.
Protecting Stock Portfolio with E-Mini S&P Options
Traders with a broad-based stock portfolio could explore using CME E-Mini S&P 500 Options (
ES) to hedge the market downturn risk.
The ES futures contract has a notional value of $50 times the S&P 500 index. On December 23rd, the March 2026 contract (ESH6) was quoted at 6,954. Each contract has a notional value of $347,700.
To hedge the risk of index drawdown greater than 3%, traders could buy Put Options on ESH6 with a strike price of 6,750. On Wednesday, this Put is quoted at 112.50. To buy 1 Put, the trader is required to pay an upfront premium of $5,625 (= 112.50 x 50).
For a $1 million broad-based stock portfolio, what happens if the S&P 500 loses 10%?
• With no protection, the portfolio will lose approximately 10%, or -$100,000.
• Alternatively, traders could buy 3 Put Options, with notional value of the underlying futures contracts approximating the $1 million stock portfolio.
• Now that the ES futures dropped by 10% from 6954, to 6260. With options in place, the Put will gain $73,500 (= (6750-6260) x 50 x 3). Netting out the premium cost of $16,875 (= 5625 x 3), the portfolio loss will be cut by more than half, from -$100,000 to just -$43,375, or from -10% to -4.3%.
Option premium consists of intrinsic value and time value. The cost of the American option premium reflects the time value of a long protection period of three months. To lower the premium, traders could consider using shorter-dated options.
• The End-of-the-Month Options expiring January 2026 are quoted at 47.75 for the 6750-strike. This is 50% cheaper than the March expiration options ($112.50).
• The Weekly Options expiring Friday, January 2, 2026, are quoted at just $19.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
ES1!)Stock investors have a unique way of celebrating the holiday season. The “Santa Claus Rally” refers to the market typically trending up between the last five days of the year and the first two of the new year — in this case from Dec. 24, 2025, until Jan. 5, 2026.
The year-end stock market surge has indeed arrived. Major U.S. indexes climbed for a fifth straight session on Wednesday. The S&P 500 closed up 0.3% and posted a fresh record of 6,932.05, and the Nasdaq Composite gained 0.2%, settling at 23,613.31. The Dow Jones Industrial Average gained 288.75 points, or 0.60%, and also posted a closing record of 48,731.16.
On Tuesday, the Commerce Department announced the third-quarter U.S. GDP at 4.3%, surpassing the market consensus of 3.2%. After the GDP report, fed funds futures trading indicates two Fed rate cuts in 2026, according to the CME FedWatch Tool.
Behind the scenes, “Smart Money” has quietly turned bearish on the stock market. CFTC’s Commitments of Traders (COT) report shows that, as of December 16th, CME E-Minis S&P 500 futures have total open interest (OI) of 2,466,313 contracts.
• “Leveraged Funds” hold 218,923 Long positions, 608,090 Short positions and 149,554 in spread positions.
• The long/short ratio of 1-to-2.8 shows that “Smart Money” manager to stay sober while retail investors are drinking cocktail.
Apollo Switches Off the Risk Button
On Tuesday, Apollo Global Management, a giant alternative asset manager with nearly $1 trillion in assets under management, announced a strategic shift toward capital preservation, liquidity buildup, and risk reduction. Apollo cites economic uncertainty, inflation, geopolitical risk, and lofty valuations as driving forces behind its actions.
In my opinion, Apollo’s repositioning signals not just a tactical change at one firm, but a broader inflection point in investment strategy among institutional investors.
This also illustrates the importance of the COT report as a leading indicator. You could spot big moves by the institutional investors weeks before they make them public.
Protecting Stock Portfolio with E-Mini S&P Options
Traders with a broad-based stock portfolio could explore using CME E-Mini S&P 500 Options (
ES) to hedge the market downturn risk.The ES futures contract has a notional value of $50 times the S&P 500 index. On December 23rd, the March 2026 contract (ESH6) was quoted at 6,954. Each contract has a notional value of $347,700.
To hedge the risk of index drawdown greater than 3%, traders could buy Put Options on ESH6 with a strike price of 6,750. On Wednesday, this Put is quoted at 112.50. To buy 1 Put, the trader is required to pay an upfront premium of $5,625 (= 112.50 x 50).
For a $1 million broad-based stock portfolio, what happens if the S&P 500 loses 10%?
• With no protection, the portfolio will lose approximately 10%, or -$100,000.
• Alternatively, traders could buy 3 Put Options, with notional value of the underlying futures contracts approximating the $1 million stock portfolio.
• Now that the ES futures dropped by 10% from 6954, to 6260. With options in place, the Put will gain $73,500 (= (6750-6260) x 50 x 3). Netting out the premium cost of $16,875 (= 5625 x 3), the portfolio loss will be cut by more than half, from -$100,000 to just -$43,375, or from -10% to -4.3%.
Option premium consists of intrinsic value and time value. The cost of the American option premium reflects the time value of a long protection period of three months. To lower the premium, traders could consider using shorter-dated options.
• The End-of-the-Month Options expiring January 2026 are quoted at 47.75 for the 6750-strike. This is 50% cheaper than the March expiration options ($112.50).
• The Weekly Options expiring Friday, January 2, 2026, are quoted at just $19.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
Jim W. Huang, CFA
jimwenhuang@gmail.com
climatehedge.net
jimwenhuang@gmail.com
climatehedge.net
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Jim W. Huang, CFA
jimwenhuang@gmail.com
climatehedge.net
jimwenhuang@gmail.com
climatehedge.net
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.