Category: Volatility

Welcome to the Casino

Last week we learned how to lose 40% in a day using ETFs. Abridged version: combine leverage with high volatility asset classes… This was of course a tongue-and-cheek exercise. No one buys such things with the goal of losing 40% in a day – they buy with the goal of making that much. And not […]

Volatility Spiked. Now What?

Well, that didn’t take long. 1) Is Shorting Volatility a Free Lunch? 2) What Happens When Volatility Rises? These were the titles of my last two posts. And today both questions were answered in extreme fashion. The Volatility Index (VIX) rose 46%, the 7th largest 1-day spike in history. The S&P 500 declined 1.8%, its […]

May you live in uninteresting times. Market volatility has become a thing of the past. To wit, the S&P 500 (over the past 15 trading days) is trading in its narrowest range in history. The VIX, the so-called “Fear Index,” is lower than 99% of historical readings. What are investors afraid of these days? You […]

Thinking about shorting volatility? You’re not alone. Short interest in the long volatility ETN (VXX) has exploded higher in recent months. Source: RBC, Zerohedge Why does everyone want to short vol? 1) Shorting volatility (ex: shorting the long volatility ETN VXX) has been enormously profitable since 2009… 2) This week the Volatility Index (VIX) hit its […]

Have Stocks Become Less Risky?

Have stocks become less risky? It certainly feels that way… 1) Annualized volatility in the S&P 500 has moved down to 6.2%, its lowest level since May 2007. Going back to 1928, the volatility over the past year has been lower than 97% of historical periods. 2) Not only has volatility been low, but the […]