Volatility Trading in the COVID-19 Era: Shaken not Stirred

In 2020, the U.S. and global equity markets have been shaken by Virus and Volatility. The year has been dominated by a global pandemic, trade wars, civil unrest and a hotly contested U.S. presidential election. Each one is enough to heighten volatility, but all together they translate to turbulent markets that are not just stirred, but violently shaken.

The Cboe Volatility Index^® (VIX^® Index) measures the market’s expectation of future volatility conveyed by S&P 500 Index option prices. The VIX^®, aka the “Fear Index”, was created by Professor Robert Whaley and launched in January 1993.

Although the VIX itself is not an investable index, there are VIX-linked securities that have the potential to cushion losses and generate profits. But the VIX futures term structure makes direct positions in many VIX-linked securities unsuitable for buy-and-hold investment due to negative expected returns. With the prospect of heightened volatility, it’s vital to vet and hire volatility (VOL) traders with deep experience and proven track records at interpreting VIX signals.

Shelly Goldberg

Shelley Goldberg was a commodities strategist for Brevan Howard Asset Management and Roubini Global Economics, a
hedge fund manager for G3 Capital Partners and a contributing writer to Bloomberg Opinion