One corner of the derivatives market—known colloquially as “crash protection”—may be telling a more complicated story, however. When investors buy S&P 500 options that only generate profit if stocks plunge, they are likely hedging their losses in the event of a market swoon. The level of the CBOE SKEW Index, a cousin of the VIX, can serve as an indicator that investors are bidding up the relative price of those doomsday options.

The index hit an all-time high when markets closed on Christmas Eve. Bill Sterling, global strategist at GW&K Management and former chief international economist at Merrill Lynch, told Fortune that buyers are protecting themselves against unexpected market downturns in case other parts of Trump’s agenda—particularly regarding tariffs and mass deportations of immigrants—wreak havoc on equities.  

“To understand this paradox, think of the stock market as a house in a hurricane-prone area,” he wrote in a recent note. “The forecast might show clear skies ahead, but prudent homeowners still pay up for insurance.”

That’s reflected, he said, in two nuanced measurements of investor sentiment. The more famous VIX, formally the CBOE Volatility Index, measures the expected price fluctuations, or volatility, in S&P 500 call and put options over the next 30 days. The calculation uses options that are “at the money,” meaning their strike price—at which an investor has a right to buy or sell the security in question—is identical to their underlying asset's current market value.

The SKEW, meanwhile, uses strikes that are “out of the money,” or well below market price. It’s an attempt to gauge “left-tail risk”—statistician-speak for a very bad day. The higher the level of the index, the more concerned you should be (at least in theory) about an equity sell-off, Nitin Saksena, head of U.S. equity derivatives research at Bank of America, explained to Fortune.

“The VIX is just, ‘How much are things going to move up and down?’” he said. “This is more like, ‘What's the risk of something going wrong?’”

To clarify, traders aren’t paying record prices for insurance in absolute terms. Rather, as Saksena explained, investors are “paying a record amount for crash protection relative to protection against the more moderate sell-off.”

There’s one more caveat, he added: Technical factors in the trade of options that are far out-of-the-money, including how market makers manage their risk, complicate how much of the index’s rise captures increased demand for hedging strategies.

“I just wouldn't claim that all of it’s economically driven,” Saksena said. “I'm sure some of it is, but I'd be surprised if all of it were.”

Wall Street awaits clarity on Trump tariffs and deportations

That said, Sterling notes traders are preparing in case the self-described “Tariff Man” follows through on some of his more extreme proposals. Trump has recently floated a blanket 25% tax on imports from Mexico and China, as well as a minimum 10% tariff hike on all Chinese merchandise. Economists and major company executives warn that those measures would slow growth and raise prices.

“But nobody, I think, on Wall Street, believes anything like that is going to happen at this point,” Sterling said. “The mantra you hear is, ‘Take Trump seriously, but not literally.’”

The nomination of Scott Bessent as Treasury secretary supported the bull case that Trump’s tariff threats are just bargaining chips. In Sterling’s view, however, the real wild card is the President-elect’s saber-rattling about immigration.

Trump has promised to carry out the “largest deportation program in America history,” a chilling statement for the more than 8 million people estimated to be working in the country illegally. An analysis by the Peterson Institute for International Economics found that the removal of all those unauthorized workers would lower GDP 7.4% by 2028.

“They modeled that as just a huge negative supply shock to the economy,” Sterling said, “because it's a matter of simple arithmetic. If you take a lot of people out of your workforce and out of your consumer group, you will have lower growth, almost certainly, and you will have lots of disruption to many industries that are relying on the immigrant workforce.”

Wall Street doesn’t think the second Trump administration will go that far. Still, Sterling said individual traders should note that sophisticated investors are taking steps to protect themselves.

“It underscores the wisdom of maintaining balanced portfolios,” Sterling wrote in his note, “rather than making all-or-nothing bets on particular outcomes.”

Update: This story was updated to reflect the CBOE SKEW Index hitting an all-time high when markets closed on Christmas Eve.