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Thou Shall Not Short the VIX

Thou Can Not Short the VIX

Nicolas Rabener
10 min read
30 Mar 2020

SUMMARY

  • The VIX has not remained at high levels for long in recent times, theoretically making a mean-reversion strategy attractive
  • However, there were periods historically where volatility stayed elevated for years
  • Furthermore, the VIX is not a tradeable index and related products should be viewed with caution

INTRODUCTION

Scratching the surface of most people’s knowledge often does not reveal depth, but a lack thereof. When the former US Democratic candidates Tom Steyer and Amy Klobuchar were asked to name Mexico’s president, who is one the key counterparties for any US president, both failed. Surveying US citizens on where well-known tourist destinations like Italy or long-standing political foes like Iran are located on a world map results in rather awkward outcomes.

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