The BCK Volatility Blog

April 2017


April 23, 2017

While we do not express our political views in these pages, we must be ever mindful of how the shifting political landscape can influence world financial markets. With the French Election beginning yesterday, it is essential that investors be prepared to respond to market changes. We do not bet on outcomes; we react to them. We are looking at a situation very similar to what we had last June when Great Britain left the European Union. The idea that a potential Frexit could happen seems inconceivable but then again that was the commonly held sentiment before Brexit. So we must be prepared for another major nation to leave the European Union.

The day after Brexit, VIX jumped 49.30% and XIV dropped 26.79% (we were in cash at the time). Exactly 30 days later our strategy generated returns of 28%. During this time the S&P 500 fell by 6%. These returns demonstrate that even during market downturns, our strategy returns profits when other strategies cannot, so with this upcoming French election, we will no be betting on what will happen and how the markets will theoretically react. We will wait for the outcome and make calculated decisions with the full benefit of hindsight.