One ‘Ominous’ Sign For The Vol. Sellers: Fatter Tails

October was supposed the month when volatility returned. Or maybe not. Actually no one believed that.

Seasonality made for some good “watch out” posts, but the reality of the situation is that between the central bank/market communication loop, the dynamics and perverse incentives that loop creates, and the vol. suppressing effect of indiscriminate flows, there’s no hope of vol. catching anything more than a fleeting bid.

Besides, as Goldman wrote a couple of weeks ago, October seasonality isn’t really a thing during low vol. regimes, a factoid that’s either interesting or completely tautological depending on how predisposed you are to cynicism. Here’s the chart:

Meanwhile, when it comes to the potential for an N-vol spike to cause problems, flows into levered long VIX ETPs have offset outflows from short products to ensure that the rebalance risk remains near record highs. Here are the updated charts on that:

But will it ever matter? Will, the vol. sellers ever, as Bloomberg’s Cameron Crise puts it, “get their comeuppance”?

Maybe, and here’s Cameron to explain why…

Via Bloomberg