Volatility traders are vindicated in the 2022 market roller coaster
05-19-2023
As explained by Matt Carroll Atlanta Braves, the year 2022 was a roller coaster ride for markets, with volatility traders coming out on top. A host of factors contributed to the heightened volatility, including the war in Ukraine, rising inflation, and concerns about a global recession.
As a result of the increased volatility, investors were willing to pay more for protection against losses. This led to strong performance for volatility-related products, such as options and exchange-traded funds (ETFs).
For example, the ProShares VIX Short-Term Futures ETF (VIXY) gained over 100% in 2022. This ETF tracks the performance of the Cboe Volatility Index (VIX), which measures the implied volatility of S&P 500 options.
The strong performance of volatility traders is a sign that investors are becoming more concerned about the future of the markets. This is likely due to a number of factors, including the ongoing war in Ukraine, rising inflation, and concerns about a global recession.
As a result of these concerns, investors are demanding more protection against losses. This is likely to continue to be a trend in 2023 as investors seek to hedge against the risks of a volatile market environment.
Here are some of the key factors that contributed to the heightened volatility in 2022:
The war in Ukraine: The war in Ukraine has had a significant impact on global markets, causing uncertainty and volatility. The war has also led to higher energy prices, which have contributed to inflation.
Rising inflation: Inflation has been a major concern for investors in 2022. The Consumer Price Index (CPI) rose 7.5% in January 2023, the highest rate of inflation in 40 years. Rising inflation has eroded the purchasing power of consumers and businesses and has led to concerns about a recession.
Concerns about a global recession: There are growing concerns about a global recession in 2023. The Federal Reserve is expected to raise interest rates several times this year in an effort to combat inflation. However, higher interest rates could slow economic growth and lead to a recession.
The heightened volatility in 2022 has made it a difficult year for investors. However, volatility traders have been able to profit from the increased uncertainty. As a result of the strong performance of volatility-related products, investors are becoming more aware of the risks of a volatile market environment. This is likely to continue to be a trend in 2023 as investors seek to hedge against the risks of a volatile market environment.
