Historic low market volatility is spurring investors to find returns in new places, with some rushing their money into what is sometimes referred to as “the most dangerous trade in the world.”
In a research note to clients, David Lafferty, chief market strategist at Natixis Asset Management, explained that super-low volatility has spurred a new sub-industry – “shorting” volatility with a number of exchange-traded funds and derivative products that have a “V” in their tickers.
The CBOE Volatility Index, or VIX, is a key measure of market expectations of a near-term volatility conveyed by S&P 500 stock index option prices. The VIX, widely considered as a measure of fear and uncertainty in the market, closed the day after the French election on May 9 at 9.77, its lowest level since December 1993. The VIX is currently trading at 10.4 and is down 26 percent year-to-date.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.