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Markets

Volatility is back, but VIX expected to remain below 20, summit attendees say

Traders work in the Cboe Volatility index pit on the floor of the Cboe Global Markets exchange in Chicago. Professional investors expect the VIX will remain below 20 this year.

Bets are on for the Cboe Volatility index to remain below 20 in 2018, a poll of 450 attendees at the ninth annual Global Volatility Summit showed.

About 67% of the audience of institutional investors, money managers and volatility traders said they expect that the VIX will remain below 20 this year with the balance expecting the index to rise above that mark.

The VIX closed at 13.58 on Wednesday. The daily average in 2017 was about 9.86.

Paul Britton, founder and CEO of Capstone Investment Advisors, a specialist volatility manager and the sponsor of the conference on Wednesday, said during a presentation that there's been "a volatility regime change," arguing that there were too many reckless risk takers whose short-volatility strategies were wiped out in the sharp upward spike of the VIX in early February.

"Short-volatility strategies are on watch," he said, noting that short-volatility managers lost a total of $3.2 billion or "two years of (profit and loss) in one week in February."

An overwhelming majority of summit attendees — 79% — agreed with Mr. Britton's assessment of the regime change.

Mr. Britton said the Capstone investment team is "increasingly bullish on equity volatility for the first time in 2 1/2 years" and is assured that the extremely low-volatility levels of 2017 are gone given the lack of liquidity in the market and steady positioning by volatility managers.

Capstone manages $6 billion in hedge fund and long-only volatility strategies for institutional investors.