Volatility Traders Are Cashing In While Stockholders Suffer
So, here’s the scoop: while most folks holding stocks are feeling pretty uneasy and watching their investments take a nosedive, volatility traders are actually raking it in right now. It sounds like an upside-down world, right? But it’s true!
Stocks Are Slipping, and Here’s Why
In the last month alone, the stock market has been shaky, with all 11 sectors of the S&P taking a hit. The numbers are a bit sobering: since February 18, the S&P 500 has dropped a hefty 8.4%, and the Nasdaq Composite isn’t doing much better with an 11.9% decline. Ouch!
This turbulence is pushing the Cboe Volatility Index, often dubbed the “fear gauge,” to rise—a staggering 52% in just 30 days. When uncertainty looms large, this index tends to spike, making it a busy playground for volatility traders.
How the Pros Are Making Bank
Kris Sidial, co-chief investment officer over at Ambrus Group, spilled the beans on why volatility traders are thriving. He mentioned, “We make money when markets are in dispossession.” Basically, while everyone else panics about potential market crashes, these traders capitalize on that fear. With many investors feeling off-balance, it’s a ripe time for rebalancing portfolios.
Michael Nauss of StatsEdgeTrading offered insights into the strategies at play. Think of “bracketing”: that’s when you grab both puts and calls for the same strike price with the same expiration date. This clever maneuver allows traders to profit whether the market swings up or down.
Options Trading: Hotter Than Ever
Options trading is gaining crazy popularity, especially through platforms like Robinhood, which recently reported some record-breaking volumes. Everyone seems to be cashing in on options as they navigate the turbulent waters of the stock market.
And just to give you an idea of how seasoned traders are prepping for the unpredictability, Sidial predicted this chaos way back in December, hinting at the kind of volatility we’re seeing now. He noted that various players—ranging from overseas pensions to domestic hedge funds—were already dusting off their 2016 playbook, gearing up for a bumpy ride.
What’s Next for the Market?
As for what the future holds, it’s anyone’s guess. Nauss believes stocks are so oversold that some good news could give them a much-needed jolt. But, he admits, beyond that, “I have no idea.”
So, whether you’re holding stocks or diving into volatility trades, keep your eyes peeled. It’s a wild ride out there, and one thing’s for sure: the markets aren’t boring, that’s for sure!
