London — As a much-vaunted Trump reflation trade fizzled and the US president found himself embroiled in controversy, the big market surprise in the first half was that volatility actually fell. Traders who shorted the Chicago Board Options Exchange’s (CBOE) volatility index (VIX) saw their bets pay-off as the gauge plunged 20%, taking its quarterly average to the lowest level since 2006. The question is, how long can it last? JPMorgan Chase is warning of more market turbulence as the European Central Bank (ECB) and Bank of Japan begin paring their economic stimulus, while Goldman Sachs says net positions in exchange-traded products favour long bets on volatility over short. In other words, investors are bracing for less stable times. VIX calls get dear As the CBOE VIX continued to edge lower this year, investors increasingly paid up to protect against a rebound, sending the cost of calls versus puts to the highest level since October 2015. VIX options volume has surged this year, w...
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