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Volatility is back — updated

Betting on low volatility has been a popular trade — until today, when it stopped working.Monday’s 4-per-cent selloff in US stocks was fueled by sharp changes in positioning from traders betting that volatility would stay low and making systematic bets on market momentum, according to a postmortem from JPMorgan quant analyst Marko Kolanovic.The VIX rose above 30 for the first time since 2015 that day (it was 37.32 at pixel).Now, there could be as much as 0bn of outflows from funds that trade using those types of strategies, says Kolanovic. He thinks the outflows could affect CTAs, along with funds that bet on low volatility, target volatility levels, or follow risk parity strategies.Updating to observe that exchange-traded securities investing in volatility have gotten crushed. George

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Betting on low volatility has been a popular trade — until today, when it stopped...

Alexandra Scaggs
Alexandra Scaggs is a markets reporter for the Wall Street Journal in New York. She writes about the U.S. stock market and investment trends. She also covers the business of markets research, writing on the calls, personalities and moves of high-profile analysts and strategists. Ms. Scaggs graduated from Washington & Lee University with a degree in business journalism.

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