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VOLATILITY IS BACK



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The most profitable trades of 2017 are suddenly not working. Managers who made a killing selling volatility over the past five years, woke up to the harsh reality that no strategy works forever, and that selling volatility in a late-cycle economy can be a recipe for disaster. The carnage was most evident in the sudden closing of an exchange-traded note, XIV, after losing almost 100% of its value overnight. But make no mistake, it was not only retail that got hurt during the February volatility spike -- there are a plethora of hedge fund managers licking their wounds. When a single day of market action can wipe out years of collected premium, you know you are in a crowded trade.

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