Traders' Roundtable

Here's a chart of a 30 day moving average on the daily range as a % of price on the SP 500 futures over the last twenty years. We're now approaching the lowest volatility since 1995 and the trend isn't good either. I just hope we arent in for a repeat of the 93-95 years.

-bbc

Reduced volatility may be bad for some systems but it can be useful in other circumstances.

It wouldn't surprise me to see it stay low for a couple of years.

Forum Mgmnt wrote:Reduced volatility may be bad for some systems but it can be useful in other circumstances.

Under what circumstances do you see it as beneficial? Since we are seeing fewer meaningful moves of any kind (trend, counter-trend, open range breakout, volatility breakout, etc), it's hard to see any kind of system that can benefit except maybe one that scalps deviations from a channel for a few points at a time.

Even selling options doesn't become more viable, since the premium is down substantially from before.

This is not to say that the S&P is no longer tradeable, as it certainly is. I would argue though that the trade opportunities are reduced for the vast majority of trading methodologies compared to the 1996-2002 years.

-bbc

Reduced volatility may be bad for some systems but it can be useful in other circumstances.

You can use it as hint for further learning and study; another post of this forum discussed an article from Economist about the effects of lower volatility and yields on markets.

Low volatility could mean that is time to fine tune your risk management system, i.e. what's the impact on the N measure for the Turtle Trading system or on the volatility break-out systems?

Low volatility and yields sometimes increases the liquidity risk and slippage.i.e what happens if everyone look for an exit when the overall market risk is perceived as low?

Low volatility could also mean lower premiums in the options market, how can we take advantage of cheaper options?

Even selling options doesn't become more viable, since the premium is down substantially from before.

Selling options doesn't seem like a trend following strategy to me; long out-of-the-money options seems more likely a trend following strategy.

best regards, as ever

A resource to check volatilities in the US futures markets

http://platinum.optionetics.com/oafutures.html

best regards,as ever