? Bloomberg News
Turbulence is reappearing in the stock market. For traders in exchange-traded notes that rise and fall with market volatility, it?s like it never went away.
Three of the most popular securities that appreciate when swings in equities increase are poised to post record volume in 2014, data compiled by Bloomberg show. The latest flurry of trading began when markets buckled in October and failed to subside even as markets calmed down in November.
Now, with the Chicago Board Options Exchange Volatility Index (VIX) posting its biggest increase since 2010 last week, anyone who owns one of the hedging instruments looks prescient. Investors who flocked to the notes even as volatility slid back to a three-month low earlier this month recorded the biggest gains in more than three years last week.
?People just want more exposure to long volatility when volatility is low,? Rocky Fishman, a New York-based equity derivatives strategist at Deutsche Bank AG, said Dec. 8. ?They look for ways to get long the VIX. Then we will frequently see flows into levered ETNs.?
More than $1.8 trillion was erased from global equities last week as oil?s drop below $58 a barrel raised concern over the strength of the global economy. The VIX, a measure of trader anxiety that has spent most of the year hovering about 25 percent below its historical average, jumped 78 percent as oil?s impact rippled through financial markets.
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