Traders pay up for crash protection—time to worry?

CNBC reports:

Options traders are starting to pay up for crash protection, according to a recent note from Goldman Sachs. The question is whether that points to a heightened chance of a major correction.

"Long-dated crash put protection costs on the [S&P 500] have more than doubled over the past 9 months," a Goldman Sachs options research team led by John Marshall wrote. "We believe it is an important development to watch as it implies investors are increasingly concerned about downside risk even as U.S. equities trade near all-time highs."

Specifically, the options that have more than doubled in value are 55 percent out-of-the-money puts that expire in five years. That is to say, in order for these derivatives to pay off come expiration, the S&P would have to lose more than half its value over the next five years.

A look at the downside.