Exchange-trade products betting that volatility will sink lower have never been more popular as Short-Volatility Funds Are Being Flooded With Cash.

Even as the CBOE Volatility Index plunges to its lowest on record and U.S. stocks march to fresh highs, investors have continued to give the short-volatility trade their vote of confidence this year. With $2.4 billion in assets, short volatility exchange-traded funds are backed by the most cash on record, according to data compiled by Bloomberg.The funds’ meteoric rise is to some degree a bet that the U.S. stock market will keep rising, since the VIX and S&P 500 move in opposite directions about 80 percent of the time. With the S&P 500 up 16 percent and at its highest on record, the $1.1 billion VelocityShare Daily Inverse VIX ETN has surged 141 percent, heading toward its best yearly performance in five years.For now, the volatility bears have the momentum. Inverse VIX funds have nearly tripled in size this year alone. The amount of assets tracking short-volatility products rose above that of their long-volatility counterparts for the first time in two years in the third quarter.

Pennies In Front of Steam Roller

As it is in front of every market top, investors plow into the "sure thing" cannot-go-wrong trade.

RECOMMENDED ARTICLES

Of course, we do not know when this maina will end, we just know that it will, to the extreme detriment of those late to the party.

That's a hint to those who think another 10,000% or even another 1,000% rise in Bitcoin is a "sure thing".

For further discussion, please consider Bitcoin Debate: It's a Bubble! No, It's Not, It Cannot Be a Bubble!

Mike "Mish" Shedlock

Just in the Nick of Time: Fidelity Bans Short Volatility Funds

Retail investors can no longer trade short volatility funds at Fidelity.

No Bond Vigilantes: Just Record Short Futures Speculators

A reader asked me about "Bond Vigilantes". There aren't any, but there is a record number of speculators.

Axel Merk on Volatility, Correlation: This Time is Different. Really?!

Axel Merk at Merk Investments discusses volatility and the next thing likely to blow sky high: Correlation strategies.

Beyond Bitcoin and ICOs: The Future of Blockchain

Bitcoin may or may not be in the future, but Blockchain surely will be. The next applications will be more legitimate.

Speculators Record Short 10-Year Futures: Short Squeeze Coming Up?

JPMorgan Chase & Co.’s quantitative and derivatives strategy team warns of potential short squeeze in US treasuries.

Volatility Spikes, Equities Smashed: Congratulations Mr. 50-Cent VIX

A trader dubbed "Mr. 50-cent VIX" because he likes to buy masses of options priced near 50 cents, hit it big today.

Trapped Funds Myth: Foreign Cash Repatriation Boom in Reverse

The ongoing myth is that tax changes will ripple through the economy leading stronger growth and investment.

Fed Leaves Rates Unchanged as Expected, Dot Plot of Future Policy Splits

The dot plot of future expectations has split into two camps: Those who expect the status quo and those who see cuts.

How Much Recession Warning Did You Expect?

How often have you heard the stock market looks a year ahead of a recession?