There's Been No `Target Top' in the Short Volatility Trade

(Bloomberg) -- In late August, the New York Times chronicled the ascension of Seth M. Golden from logistics manager at a Target Corp. store in northern Florida to $100 million hedge fund manager by day trading in exchange-traded products that allow investors to take a stance on implied equity volatility as measured by VIX futures.

Nothing could more perfectly capture the modern market zeitgeist, in which stocks continue to plod higher -- relatively unmoved even by the heightened threat of nuclear war -- evoking cries that investors are far too complacent. Surely this story of a retail drone turned hedge fund tycoon marked a top for the “short volatility” trade, right?

Wrong.

Since then, the VelocityShares Daily Inverse VIX Short-Term exchange-traded note, ticker XIV, which lets investors bet on continued market tranquility and take advantage of the typical upward-sloping term structure of the VIX futures curve, has gained more than 20 percent, compared to 4 percent for the S&P 500 Index.

XIV gained 1.5 percent early Thursday to reach a new intraday high.

To contact the reporter on this story: Luke Kawa in New York at lkawa@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Eric J. Weiner, Andrew Dunn