Traders have rushed to place forward hedges against US stock markets falling, despite a sharp rise in the S&P 500 index as equity investors regained confidence on the back of the US Federal Reserve's move to slash interest rates.

Trading volumes of put option contracts on US indices and stocks rose yesterday to a level not seen since the height of the credit market's turmoil in August, contradicting positive sentiment which pushed the S&P 500 index to within 35 points of its July high after the US Federal Reserve surprised the market by cutting interest rates by 50 basis points.