VIX

What The Smartest Minds Think Of The Current Rout

What The Smartest Minds Think Of The Current Rout

2016 is shaping up to be like the latter half of 2015 but with a lot of additional dynamic forces warping and twisting the financial markets. Higher than average volatility has been the common theme so far but we're also noticing an incredible rapid shift in cross asset correlations. All this means that the current market environment is extremely rough, giving traders (ourselves included) a hell of a hard time.

It is no surprise that this is indeed the case. Policy uncertainty amongst central banks, oil prices that are stick in a moribund rut, very idiosyncratic technical flows that have caused traditionally lower beta assets to trade like mad donkeys, and of course the deep polarization of sentiment across the board.

It is on this note that we turn to JP Morgan's quantitative desk for answers, albeit nebulous. The desk analyzes markets in a less traditional manner, approaching this landscape with mathematical and technical tools most retail traders have zero access to.

Goldman's Take On Enhancing Returns In A Yield Deprived World

Goldman's Take On Enhancing Returns In A Yield Deprived World

Traders and asset managers across the world have found themselves in a market deprived of yield. We have our central bankers and their policies of zero or negative interest rates to thank.

The quest to find every marginal basis point of return has led the smartest minds to venture where few dare to. There has perhaps never been a time with this abundance of money being left clueless on where next to pour into for that extra basis point of alpha. This scares us.

There are various ways in which zero-yielding cash tries to gain alpha. One such way, and one which we feel has been one of the best and most consistent strategies to enhance returns, is to sell short-term volatility (vol) on U.S. equities.

This often misunderstood and underrated strategy has generated an impressive overall return through the last decade. The consistency of this strategy is what attracts us, along with its relative simplicity both in theory and practice.