(Bloomberg) -- Investors are paying more than ever to hedge against volatility in the South Korean stock market, which slumped the most since April on Monday before rebounding Tuesday.

The Kospi 200 Volatility Index, a gauge of option prices, hit a record high relative to the Cboe Volatility Index in the US. The spread between the two increased steadily during the formidable Korean stock rally in recent months as investors sought to both hedge their holdings and position for more gains.

Most Read from Bloomberg

ICE Begins Buying ‘Mega’ Warehouse Detention Centers Across US

LA’s $1.2 Billion Graffiti Towers Reach Bankruptcy Exit Deal

Congestion Pricing’s Unexpected Winners: Suburban Drivers

Forget Free NYC Buses: Just Build 41 Miles of New Subways

Manchester Shows What UK Economic Revival Can Look Like

Then on Monday, the VKOSPI spiked nearly 8 points — the most in almost 10 months — as equities slumped on growing worries over the artificial intelligence boom that drove the rally and boosted chip heavyweights Samsung Electronics Co. and SK Hynix Inc. As the market recovered Tuesday, the VKOSPI erased an early gain.

While no one knows if this selloff is the start of something bigger, what’s clear is that investors are cautious — and for good reason: The benchmark Kospi index has more than doubled from a low last April, far outperforming global peers. On Monday, the cost of one-month options protecting against a 10% decline in the Kospi 200 Index — the blue-chip gauge the VKOSPI is based on — jumped to its highest level since November relative to bets for a 10% advance.

“A cautious approach is needed — waiting to confirm a market rebound before entering positions,” said Ha SeokKeun, chief investment officer at Eugene Asset Management Co., who still sees the pullback as a buy-the-dip opportunity.

Volatility has risen across asset classes and equity markets, but the move in the VKOSPI has been particularly pronounced. It climbed for six straight days, reaching its highest level since April 2020 on Monday.

The high VKOSPI level reflects “heightened market uncertainty and expected extreme volatility in Korean single-stock names,” Jangwon Seo, head of global derivatives at Korea Investments & Securities Asia Ltd., said last week, recommending to consider hedging.

Kevin Warsh’s nomination as the next Federal Reserve chair added to traders’ questions over how a potential change in US policy could impact Korean shares, while a comment by Nvidia Corp.’s chief executive officer about a proposed $100 billion investment in OpenAI not being a commitment increased concerns over the AI trade. Despite reporting a surge in profit, both Samsung and SK Hynix fell after their results last week.

“In January, we’ve seen an acceleration of the market rally in Korea,” Paul Johnson, head of Asia-Pacific equities at Barclays Plc, said last week. “Given the relative illiquidity of vols in this market and low volumes of index-linked structured products supply, it’s natural to see demand for leveraged speculative trades and hedging activity through options move the market substantially.”

Most Read from Bloomberg Businessweek

Carvana’s Red-Hot Growth Runs on a Cycle of Borrowed Money

The Future of Male Birth Control Could Be Pills, Gels and Implants

Cognac Makers Are Uprooting Vines. Dumping Supplies May Be Next

Industry TV Recap: A Tabloid Drama

Canadians Are Boycotting US Ski Slopes

©2026 Bloomberg L.P.