Global Economics

Just in the Nick of Time: Fidelity Bans Short Volatility Funds

Retail investors can no longer trade short volatility funds at Fidelity.

The Financial Times reports Fidelity Bans Retail Investors from Trading Short Volatility.

“We have blocked opening trades [in SVXY],” said a Fidelity spokesperson. “You can’t buy them but you can sell them if you own them and we have increased margin requirements on other volatility ETFs to protect customers on outsized risk in this market environment.”

Short volatility funds including ZIV are also barred. XIV closed its doors following massive investor losses.

Just as it finally makes some bit of sense to consider shorting volatility, the brokerages ban the practice.

Here's the kicker. Fidelity will open volatility trading in the “foreseeable future provided the market co-operates.”

In other words, if volatility declines you can get back in.

What a hoot.

Mike "Mish" Shedlock

9 Responses

  • tim2

    Feb 9, 2018

    Retail investors should ban Fidelity

  • DFWRealEstate

    Feb 9, 2018

    #BoilerRoom

  • Bam_Man

    Feb 9, 2018

    But it's for your own good, muppets.

  • Snow_Dog

    Feb 9, 2018

    In other news, no sign of any horses, but ranchers report the gate to the corral has been securely shut.

  • Carl_R

    Feb 10, 2018

    Odd. I was actually thinking that now might be a good time to short volatility. I won't, because I really don't understand what I'm doing, and I really don't have time to figure it out at the moment, but it's much more of an interesting idea than a month ago.

  • Six000mileyear

    Feb 10, 2018

    When I was holding a winning hand in double inverse BKS in 2008, Short selling was suspended in all banks shares for a month, and the ETF value went into hard reverse. I held on until the ban was lifted, and still made nearly $100K on the trade. History is repeating, and much closer to the top. Even with a better than 75% chance of predicting the direction of the market is of no advantage considering not knowing when and which rules will be changed. Given the sudden rule change so early in the bear market, short sellers will think twice about taking a position. Short sellers are the only class of speculators REQUIRED to buy stocks. Without that buying support, markets will fall faster.

  • Mike Mish Shedlock

    Feb 10, 2018

    " Short sellers are the only class of speculators REQUIRED to buy stocks. Without that buying support, markets will fall faster." Precisely

  • Sechel

    Feb 11, 2018

    this isn't investing its's gambling. just because you can take a position long or short doesn't make it an investment. reminds me of the banned bucket shop trading

  • xil

    Feb 12, 2018

    "Captain Renault: I'm shocked, shocked to find that gambling is going on in here! [a croupier hands Renault a pile of money]. Croupier: Your winnings, sir. Captain Renault: Oh, thank you very much."

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