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Volatility: The Calm Before the Storm?

Volatility: The Calm Before the Storm?

Posted July 9, 2024 at 11:15 am
Dimitri Speck

Volatility, the tendency of prices to fluctuate, is not just an academic construct – there are also products such as ETFs based on it.

Volatility has recently been quite low by historical standards.

Can we now expect an increase in volatility? Let’s take a look at its seasonal pattern.

Volatility over the course of the year

The chart below shows you the seasonal development of the CBOE volatility index, which is based on the S&P 500, over the past 34 years.

The horizontal axis shows the time of year, the vertical axis the level of volatility.

This allows you to see at a glance how volatility typically develops seasonally.

Volatility index, seasonal trend over 34 years

Volatility index, seasonal trend over 34 years

Volatility increases seasonally from mid-July. Source: Seasonax

As you can see, there is a pronounced seasonality of volatility.

The strongest seasonal increase occurs from mid-July to the beginning of October.

Fluctuations are now increasing seasonally!

Over the past 34 years, volatility between July 15 and October 7 has increased almost 80% of the time

In fact, it has risen every time in the past 10 years.

That could happen again now.

Nevertheless, most investors do not currently expect volatility to increase.

However, pay attention to the seasonal statistics. These tend to indicate stronger price fluctuations and possibly a storm.

A certain degree of caution on the stock market seems appropriate, and possibly also the purchase of volatility products.

Originally Posted July 9, 2024 – Volatility: The Calm Before the Storm?

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Past results and past seasonal patterns are no indication of future performance, in particular, future market trends. Seasonax GmbH neither recommends nor approves of any particular financial instrument, group of securities, segment of industry, analysis interval or any particular idea, approach, strategy or attitude nor provides consulting nor brokerage nor asset management services. Seasonax GmbH hereby excludes any explicit or implied trading recommendation, in particular, any promise, implication or guarantee that profits are earned and losses excluded, provided, however, that in case of doubt, these terms shall be interpreted in abroad sense. Any information provided by Seasonax GmbH or on this website or any other kind of data media shall not be construed as any kind of guarantee, warranty or representation, in particular as set forth in a prospectus. Any user is solely responsible for the results or the trading strategy that is created, developed or applied. Indicators, trading strategies and functions provided by seasonax GmbH or on this website or any other kind of data media may contain logical or other errors leading to unexpected results, faulty trading signals and/or substantial losses. Seasonax GmbH neither warrants nor guarantees the accuracy, completeness, quality, adequacy or content of the information provided by it or on this website or any other kind of data media. Any user is obligated to comply with any applicable capital market rules of the applicable jurisdiction. All published content and images on this website or any other kind of data media are protected by copyright. Any duplication, processing, distribution or any form of utilisation beyond the scope of copyright law shall require the prior written consent of the author or authors in question. Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.

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