Asymmetric Investment Returns is a blog authored by Mike Shell since 2006, covering topics about asymmetric investing and trading for asymmetric risk/reward in pursuit of asymmetry.
Probability theory is a powerful tool that helps us understand the likelihood of events. However, when it comes to managing risks in real life—whether in finance, business, or disaster preparedness—simply understanding the probabilities of events isn't enough. Robust risk management often focuses on preparing for worst-case scenarios, not just the most likely ones. Here’s why pure probability sometimes conflicts with smart risk management.
Is the U.S. Stock Market at an Elevated Risk Level? What Can We Do About It?
As of today, the VIX futures term structure reveals an ongoing contango condition, as seen in the chart. The front month (October) futures contract is priced at 20.95, higher than the VIX Index (spot VIX) at 20.78. As we look further out in the curve, futures for November through May decline initially, bottoming out around December, and then start rising again, though still lower than the October contract.
The index's "Greed" reading suggests that while optimism is high, the market might be overbought, and corrections could follow if sentiment turns. For some, this can signal an opportunity to be cautious or contrarian.
Overall, the term structure reflects the market's outlook for gradually increasing volatility in the coming months. It's a guide strategies around volatility trading, hedging, and managing risk exposure in anticipation of market shifts.
September is historically weak for global equities and risk assets due to a combination of behavioral, technical, and macroeconomic factors. Here are the reasons.