``Soros has taken a bearish position through the purchase of put options on the S&P 500. Surely he is not alone in looking at relatively inexpensive market insurance for downside protection (as myriad risks become increasingly apparent). These types of instruments tend to exacerbate market volatility. In market declines, those that have sold/written market insurance must dynamically hedge this exposure, which can lead to self-reinforcing selling. At the same time, these types of bearish bets also provide buying power when markets reverse course and rally. This helps to explain why markets (think 1999 or 2007) tend to go into speculative melt-up mode right into the face of deteriorating fundamentals. ''

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