Gulf News

Volatil­ity may ac­tu­ally be good for traders

- BY SIDDESH SURESH MAYENKAR Se­nior Re­porter Stocks & Markets · Financial Markets · Finance · Business · Belgium · Belarus · Chicago Board Options Exchange

Don’t fear mar­ket volatil­ity, in­stead be tac­ti­cal about it — that’s the ad­vice be­ing given by mar­ket ex­perts who spoke to Gulf News.

The CBOE Volatil­ity In­dex, which mea­sures the stock mar­ket’s ex­pec­ta­tion of volatil­ity im­plied by S&P 500 in­dex op­tions, rose 26 per cent on Tues­day to 20.74, the pick-up hav­ing started in Oc­to­ber.

How­ever, the fear in­dex is still 33 per cent lower than lev­els last seen in Fe­bru­ary this year.

“We think that [a] re­turn of volatil­ity is good for bar­gain hunt­ing as good com­pa­nies have now cor­rected be­tween 15-25 per cent,” Ro­hit Nanani, founder and di­rec­tor of Ar­row Cap­i­tal, told Gulf News.

“Our mantra for now is to ig­nore the noise and fo­cus on stocks which you al­ways wanted to own.”

An­a­lysts ex­pect the volatil­ity to linger for a few more months.

“More broadly, we are en­ter­ing a new volatil­ity regime. The years of quan­ti­ta­tive eas­ing and ul­tra-low rates drowned out al­most all sources of volatil­ity,” Karolina Noc­u­lak, in­vest­ment strate­gist, Aberdeen Stan­dard In­vest­ments.

“With the Fed con­tin­u­ing to raise in­ter­est rates and re­duc­ing its bal­ance sheet, more volatil­ity is in­evitable.”

An­a­lysts feel that the decade-long quan­ti­ta­tive eas­ing poli­cies may have in­flated as­set prices, which are ex­pected to find their new nor­mal lev­els in an en­vi­ron­ment where there is a dearth of cheap money.

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