The Short-Volatility Trade Is Now So Big It's Starting to Break
- Betting on stock calm becoming less profitable: IPS Strategic
- Mass selling of equity options post-crisis has dented strategy
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One of the hottest strategies of the bull market for stocks may be getting too popular for its own good, placing billions of dollars and a slew of money managers at risk of being burned.
The short-volatility trade, where investors sell options to bet against equity price swings, is becoming less profitable. The strategy has in theory made no money for investors 42% of the time since 2018, according to new research, compared with a recent average of about 30%.