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Buying Volatility


This morning is another slow news day with little data out of the Europe and the US, so we will take the opportunity to discuss our specialty: trading volatility.

Yesterday my CNBC collegue Bob Pisani discussed reasons to get long volatility at these levels. You can watch his video here: http://video.cnbc.com/gallery/?video=3000109678&play=1

As Bob mentions, the VIX is near multi-year lows, the NYSE is experiencing historically low volume, large-cap stocks at multi-year highs, and there is significant political risk in the US and abroad. We agree with Bob that this is a great time to buy volatility. The problem is that the spot VIX is a statistical calculation and not tradable itself. So, how can an investor own volatility?


All of the above strategies can be profitable, but require precise market timing and have risks of time decay and negative roll yield. The Stutland Volatility Group has developed a proprietary method of actively trading a basket of securities in order to provide an 83% correlation to changes in spot VIX. We believe this to be the superior way to hedge long stock portfolios and own volatility. To learn more about what we can do to reduce downside risk and volatility in your portfolio, contact us today.


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