Stock Market Volatility: Options Traders Expect More, More, More
Alan Farley | November 21, 2018
A new normal is taking root in U.S. stock markets, and the word that best sums it up starts with a "V".For the second time this year, volatility has returned with a vengeance, and traders in the equity options market are betting ongoing market gyrations are not about to let up any time soon.This year's regular bouts of volatility mark a sharp departure from 2017 when daily stock gyrations plunged to a multi-decade low. Indeed, the S&P 500 Index is on pace for its most volatile year since 2015, Refinitiv data showed. Persistent trade-related tensions between the United States and China, weakness in the tech sector, worries about slowing global growth and jitters about the Federal Reserve marching toward higher interest rates has taken a toll on U.S. stocks in recent weeks and the S&P 500 Index has shed all its gains for the year. Concerns about the outcome of a meeting between U.S. President Donald Trump and Chinese President Xi Jinping at next week's G20 summit and how it might affect the outlook for Sino-U.S. trade relations is the latest worry to be playing on options traders' minds.Unlike in 2017, when U.S. stocks went up in almost in a straight line, options traders expect stocks to dance to a more volatile tune for the foreseeable future, analysts said."We have had abnormally positive conditions for the last three, five, seven years," said Richard Selvala, chief executive at Harvest Volatility Management LLC, in New York.