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.
On April 3, 2025, the S&P 500 fell 4.8%, but the VIX only hit 30—well below the historical average. This volatility underreaction may signal underpriced risk and create asymmetric trading opportunities through long volatility setups.
Rather than just observing price trends at the index level, breadth gives us insight into the underlying participation driving (or failing to drive) those moves. When breadth deteriorates, it signals internal weakness—and in some cases, sets the stage for asymmetric opportunities.
Reflexivity is more than a Soros buzzword—it’s a market structure principle that helps explain both bubbles and crashes, trend persistence, and volatility clusters.
Systematic flows can move markets far more than headlines. Recognizing the impact of volatility-targeting strategies, CTA trend signals, and leveraged ETF rebalancing allows traders to step into the chaos with a defined edge.
Morningstar’s model says the U.S. equity market is undervalued by 6.7%. But valuation without a clear exit is not a strategy—it’s a liability.
Sector dispersion is a gift to the asymmetric investor. When sectors diverge this sharply in trend, volatility, and valuation, the environment rewards those who are willing to rotate tactically and structure trades to capture exponential upside while controlling downside risk. We may use this data to identify setups with capped downside and high upside optionality—hallmarks of true asymmetry.