Hedge funds play dangerous volatility game

Hedge funds and other sophisticated investors have been positioning themselves as sellers of volatility and correlation, despite recent global events. But some market participants are urging caution.

Yuriko Mita

Selling volatility and correlation has been a consistent money-spinner for hedge funds over the years – and an environment of low realised volatility since September 2010 has tempted many back to this trade. That hasn’t changed over the past month, say dealers. Some investors seem relatively unfazed by political upheaval in the Middle East and an earthquake in Japan on March 11, which triggered a tsunami and has even led to fears of a nuclear meltdown. These sellers believe markets will become

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It has been several years since we have seen volatility in gold. An increase in gold volatility can typically be associated with a change in sentiment and investor behavior. The precious metal has surged this year on increased demand for safe haven…

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