As 20 percent of the ten most damaging stock market drops in history have occurred in the past month, investors who understand the need to hedge at the same time are benefited from having proper expectations for various scenarios. While various volatility measures such as the CBOE Volatility Index® (VIX® Index) negatively correlate to the stock market 70 to 80 percent of the time, with the VIX typically rising in value at a generally consistent ratio percentage, during periods of anticipated market volatility investors might expect different results. [buffett] Such could be behind the recent odd swings in correlation ratios,…
Odd Price Disparity In VIX Hedges Due To Expected Volatility
Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.