The popularity of shorting volatility has risen exactly when the most popular short-based ETF'S have lost momentum. A few articles in the last couple of months have highlighted how easy it has become to short volatility. As you can see in the chart below, SVXY has traded lockstep with the SP500, hitting highs and lows almost simultaneously until recently. The SP500 is off -1% from its recent highs and the SVXY is -16% off its highs. This is a character change for SVXY and XIV.
"Each morning, at the market’s open, Seth M. Golden, a former logistics manager at a Target store, fires up the computer in his home office in northern Florida and does what he has done for years: Put on bets that Wall Street’s index of volatility, the VIX, will keep falling".--NYT
INVESTORS HAVE NEVER BEEN MORE SHORT VOLATILITY FUTURES.
Here's the bottom line; With the can't lose short volatility ETF'S losing momentum this trade just got a little harder, and I would not be pressing my bets nor venturing out into this strategy right now.
Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at email@example.com or 646-480-7463.
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