Volatility spike!

Dear Reader,

According to a number of analysts volatility should spike in the near future driven by the Federal Reserve's intentions to hike the Federal Funds Rate sooner than expected. It is a well known fact that volatility spikes most when there is a fall in market prices. When equity prices fall, they tend to fall by more compared to moves to the upside.

In my opinion, a good way to play an expected 10-15% fall in the main US indices is through short positions in high-beta US stocks(technology, financials, industrials). Mid to long term put options on the same stocks should perform well. Actually, both puts and calls on the sector stocks in questions should perform well in the short run, if volatility rises, even if the directional move is not large.


Disclaimer: This article is provided solely for informational purposes, and does not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost are the author's and they in no way express the opinion or official position of Bulgarian National Bank!

Conflicts of interest: I may possess some of the securities or currencies mentioned in the blogpost!