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Traders Breathe Greatest “Sigh Of Relief” Ever Following Election – What Happens Next?

Friday, November 11, 2016 18:33
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(Before It's News)

Tyler Durden's picturezerohedge.com / by Tyler Durden / Nov 11, 2016 1:15 PM

Via Dana Lyons’ Tumblr,

Stock market volatility expectations saw the biggest drop on record following the election.

In the buildup to the presidential election, we queried whether “Investors Were Over-Prepared For Election Volatility?”. The reason behind that observation was that near-term (e.g., 9-Day) volatility expectations, via the VXST, had jumped to the 3rd highest level ever relative to the 1-Month VIX. This was despite just moderate stock declines at the time. It was obvious that they were nervous about something, i.e., the election, other than mere price declines. But had they gone overboard with their volatility bets?

We looked back at similar historical extremes and came to a somewhat surprising discovery. As we stated in that November 1 post:

Now, normally our inclination upon seeing a sentiment reading at an extreme would be to fade it. After all, the crowd is notoriously wrong at extremes. However, the funny thing about this VXST/VIX indicator (and much of the volatility trade in general) is that the extremes are often warranted, at least in the short-term.

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The post Traders Breathe Greatest “Sigh Of Relief” Ever Following Election – What Happens Next? appeared first on Silver For The People.

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