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How to Make Money From Volatility Rise: Morgan Stanley's Ideas

  • Historically low asset-price fluctuations likely to pick up
  • Options market seen offering opportunities, though at a cost
U.S. Dollar Advances Against Other Currencies
Photographer: Scott Eells/Bloomberg

Prospects for a winding back of central bank stimulus this year, along with a potential pick-up in global inflation, have boosted the risk of greater fluctuations in asset markets that have largely moved in tandem in recent years.

Exactly how you can make money if indeed bigger swings in asset prices materialize is a tougher call than just buying and holding. Expensive financing -- or carry -- costs in many markets mean investors have to pay up for potential returns from price swings. Morgan Stanley analysts have mapped out several proposals, including using options to bet on higher oil prices and increased stress in the high-yield bond market.