Equity vol strategies get defensive

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Entire portfolios have been built on the adage that the world catches a cold when the US sneezes – a family of popular relative value trades allow investors to fund long volatility bets on Asian and European indexes by selling volatility on the S&P 500. But the rule was turned on its head in February’s selloff, leaving investors with an estimated $500 million in losses, and posing an awkward question: what to do when the US is the sickly one?

The answer varies. Some have chosen to limit their

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