The U.S. stock
market has been strangely calm this year, much to the chagrin of
investors who have been betting billions on volatility.
The
CBOE Volatility Index, or VIX, is down about 30 percent year-to-date,
even though some investors have been expecting a rockier stock market as
the Federal Reserve gets ready to raise interest rates and the
six-year-old bull market ages.
"Right now volatility is at that level because no one is talking in panic terms," said Andrew Wilkinson, chief market analyst at Interactive Brokers Group in Greenwich, Connecticut.
Year-to-date, roughly $1.9 billion has flowed into ETFs wagering on a rise in volatility, while some $1.1 billion has flowed out of ETFs betting on a drop in volatility, based on a Reuters analysis of FactSet data. Investors have been punished for those decisions.
The
biggest long volatility-focused ETF, the iPath S&P 500 VIX
Short-Term Futures ETN, for example, has attracted $766 million in new
investments this year - while it is down about 40 percent.
At the same time, money has been flowing out of ETFs that bet on low volatility. The VelocityShares Daily Inverse VIX Short-Term ETN, for example, is up 45 percent this year but has had $680 million in outflows.
"Right now volatility is at that level because no one is talking in panic terms," said Andrew Wilkinson, chief market analyst at Interactive Brokers Group in Greenwich, Connecticut.
Year-to-date, roughly $1.9 billion has flowed into ETFs wagering on a rise in volatility, while some $1.1 billion has flowed out of ETFs betting on a drop in volatility, based on a Reuters analysis of FactSet data. Investors have been punished for those decisions.
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At the same time, money has been flowing out of ETFs that bet on low volatility. The VelocityShares Daily Inverse VIX Short-Term ETN, for example, is up 45 percent this year but has had $680 million in outflows.
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