Stocks prices displayed on an electronic stock board are photographed with a zoom effect in Thailand. (Photographer: Dario Pignatelli/Bloomberg)

How One of the Most Profitable Trades of the Last Few Years Blew Up in a Single Day

Every week, hosts Joe Weisenthal and Tracy Alloway take you on a not-so-random walk through hot topics in markets, finance and economics.

In recent years, one of the easiest ways to make money in this market has been to bet on low volatility. Up until recently, markets have been exceptionally tranquil, and trades predicated on that tranquility continuing have made a fortune. But two of the most popular vehicles for making that trade, XIV and SVXY got obliterated in one day in early February. On this week's episode of the Odd Lots podcast, we speak to Pravit Chintawongvanich, the head of Derivatives Strategy at Macro Risk Advisors about the episode. He explains what the short volatility trade was, how specifically these funds operated, and how they ultimately became victims of their own success. 

 

To contact the authors of this story: Tracy Alloway in Abu Dhabi at talloway@bloomberg.net, Joe Weisenthal in New York at jweisenthal@bloomberg.net.

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