Editor’s Letter – Issue 130

March 2018


Some observers have suggested that the closure of the short volatility ETN, XIV, marks the end of short volatility trades. Most of the short-only volatility ETNs or ETFs have lost around 90% in the first two months of 2018. Meanwhile, the long-only versions are up 40-50% in 2018, but have often lost over 99% over a number of years, which illustrates the persistency of the volatility risk premium.

Strategies that short volatility on a limited risk basis (generally using spreads or tail...

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