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Hedge funds are ‘dancing on the rim of a volcano’

“Not only is the so-called fear gauge locked near the lowest levels on record, but hedge funds are betting it’ll decline even further” writes Joe Ciolli for businessinsider.com. The firm specifically cites the CBOE Volatility Index — or VIX — which is used to track nervousness in the US stock market. Source: businessinsider.com Share This:

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An investing legend who’s nailed the bull market at every turn says betting on the VIX is a ‘quick way to lose money’

“Betting against stock market volatility is one of the hottest trades in the market” writes Joe Ciolli for businessinsider.com.au. No, when the VIX spikes, it means the market could go either up or down a lot.Yet for some reason, people have glommed onto the idea that if the VIX spikes, the market’s going to go down.Legendary investor Laszlo Birinyi — who has nailed the eight-year bull market at every turn — is staying out of the fray completely. It seems like VIX ETFs and [exchange-traded notes] are a quick way…

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Fund manager bets millions that traders are about to get whipsawed by volatility

“The VIX VIX, -0.86% which gauges volatility in the S&P 500 index SPX, -0.11% is hovering around multidecade lows” writes Shawn Langlois for marketwatch.com. On the flip side, there’d be carnage for those who have gotten fat betting against volatility.That is what Artemis Capital’s Christopher Cole had to say to the New York Times in an interview published this week that focused on why he’s betting big that a spike in volatility is on the verge of rattling the stock market. “Volatility is an instrument of truth,” he added. “And…

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A legendary volatility pioneer says one of the market’s hottest trades is like ‘betting on the roulette’

“If you remember, before the birth of the internet bubble, some predicted that the market would collapse, and they went short, short, short” writes Joe Ciolli for businessinsider.com.au. One guy — a former manager at Target — says he’s made millions betting against the VIX. But not everyone thinks shorting volatility is so great.One of the market’s hottest trades this year has involved betting on stocks to sit still.Shorting volatility is a type of trend. Source: businessinsider.com.au Share This:

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Market Snapshot: U.S. stocks open lower after North Korea missile test

“U.S. stock-market indexes opened lower on Tuesday, with the Dow industrials down by triple digits after a North Korean missile test over Japanese airspace rattled investors, prompting them to sell assets perceived as risky” writes Anora Mahmudova for marketwatch.com. Implied volatility as measured by the CBOE Volatility Index VIX, +7.42% jumped 19%, but was still at relatively low level around 13.The S&P 500 SPX, -0.06% was down by 14 points, or 0.6%, to 2,429 at the open.The Nasdaq Composite index COMP, +0.15% declined 50 points, or 0.8% to 6,232. Source: marketwatch.com…

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Mystery trader ’50 Cent’ made $21 million from last Thursday’s stock market meltdown

“So what did 50 Cent do on Thursday, having finally reaped some fruits of his long-volatility labor?” writes Joe Ciolli for businessinsider.com. While the VIX has settled somewhat since Thursday, slightly paring its huge spike, there’s a growing chorus of market experts forecasting more turbulent times ahead. Source: businessinsider.com Share This:

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When all hell breaks loose in the markets, these securities go higher

“The iShares Gold Trust and the SPDR Gold Shares seek to track the price of gold, the oldest safe haven out there” writes John Melloy for cnbc.com. If they want a place to shelter from the storm, these securities have a track record of rising during times of market tumult, according to data cruncher Kensho.The market’s fear gauge had been unusually dormant, staying mostly below 12 for the last four months and even diving last month to its lowest level ever.Investors this week got their first taste of market pandemonium…

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Futures News 

All-time record options bets on volatility spook Wall Street over leverage risk

“The CBOE announced VIX options volume hit 2.56 million contracts on Thursday, a record for a single day” writes Dimaggio Kalish for cnbc.com. Options experts are saying Thursday’s record volume in volatility derivatives bets may signal a dangerous problem with the size of volatility-linked trading products.The focus is on the CBOE volatility index, a key measure of market expectations for near-term volatility as conveyed by the price of S&P 500 index options.One accomplished options trader said the dramatic one-day VIX surge Thursday likely stemmed from traders being forced to close…

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Gundlach’s ‘free money’ trade is already paying off

“The trade, Gundlach told Reuters, was “like free money.”” writes Akin Oyedele for businessinsider.com. “I think going long the VIX is really sort of free money at a 9.80 VIX level today,” Gundlach said, referring to the CBOE’s Volatility Index.This call is less of a wager on a stock market drop, and more of a bet that the quietest market in decades would become more volatile, Gundlach said.”I believe the market will drop 3% at a minimum sometime between now and December,” Gundlach said.The CEO of DoubleLine Capital who’s sometimes described…

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Wall Street’s ‘fear gauge’ nears 3-month high as ‘fire and fury’ sparks stock-market slump

“The CBOE Volatility Index VIX, +32.13% or VIX, jumped 40% at was recently trading near its session highs at 15.49” writes Mark Decambre for marketwatch.com. Because stock prices sink faster than they rise, the VIX is often viewed as a proxy for risk in the broader equity market.Indeed, U.S. stocks, which tend to move inversely with the VIX, were trading firmly lower. Source: marketwatch.com Share This:

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