The short-volatility trade is back, at least for a while, according to a strategist at JPMorgan.
The firm says the comeback stems from the minimal reaction Wall Street has had to disappointing corporate earnings over the past few weeks.
Investors made huge bets against volatility in 2017 as levels of market turmoil remained historically low, but some of those bets blew up in spectacular fashion a year ago.
JPMorgan equity derivatives strategist Shawn Quigg says there are other factors that are likely to put downard pressure on volatility over the longer term.
A once-wildly popular trade that failed in spectacular fashion one year ago might be back, according to JPMorgan.
It once again makes sense to bet against the Cboe Volatility Index (VIX), which is commonly known as the stock market’s fear gauge, says equity derivatives strategist Shawn Quigg. At least for now. He says traders haven’t reacted very strongly to a weak round of corporate earnings.
And since there aren’t many major reports left, there’s reason to think price swings will stay muted at least for another week or so. Quigg says that’s likely to preserve the newfound success being enjoyed by the short-volatility trade.
“If it were not …read more
Source:: Businessinsider – Finance