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.
The stock market indexes are in bear market territory, with the S&P 500 down ~18% and Nasdaq ~21% from their highs two months ago. Here we share a recap of our tactical trading observations since the market peak to get a sense of how we mitigated the carnage.
Our focus is on the direction, momentum, and volatility of trends, not headlines and tariff predictions.
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.