A popular trade that triggered a historic market meltdown back in 2018 made a comeback last year, as one barometer of its performance logged its best year in six. But as with any successful trade on Wall Street, some derivatives-market experts now fear that shorting volatility, or being “short vol,” has become overcrowded, increasing the risk that a sudden spike in the Cboe Volatility Index
VIX,
or the VIX, could spark a selloff that might send the S&P 500 tumbling.
Market veterans likely remember the short-vol trade for triggering a market meltdown in early February 2018. The incident, known on Wall Street as “Volmageddon,” saw the VIX more than double in a day, causing a short-lived but painful selloff in the broader stock market. Options-market experts who spoke with MarketWatch agree that this time around, the short-vol trade likely doesn’t pose as big of a threat to market stability as it did in the run-up to February 2018. But it still has the potential to spur unrest in the broader market if the VIX, known as Wall Street’s “fear gauge,” were to suddenly spike. Traders fret about a looming unwind Some traders see signs that such a dynamic might already be playing out. Most point to the VIX’s rise since December alongside the S&P 500
SPX
index, which has raised eyebrows across Wall Street …
Article Attribution | Read More at Article Source
VIX,
or the VIX, could spark a selloff that might send the S&P 500 tumbling.
Market veterans likely remember the short-vol trade for triggering a market meltdown in early February 2018. The incident, known on Wall Street as “Volmageddon,” saw the VIX more than double in a day, causing a short-lived but painful selloff in the broader stock market. Options-market experts who spoke with MarketWatch agree that this time around, the short-vol trade likely doesn’t pose as big of a threat to market stability as it did in the run-up to February 2018. But it still has the potential to spur unrest in the broader market if the VIX, known as Wall Street’s “fear gauge,” were to suddenly spike. Traders fret about a looming unwind Some traders see signs that such a dynamic might already be playing out. Most point to the VIX’s rise since December alongside the S&P 500
SPX
index, which has raised eyebrows across Wall Street …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]