Where Volatility Goes to Die

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Where Volatility Goes to Die

Greed, intrigue, and death are the stuff of detective novels, but there’s plenty in the more mundane mystery of two very different exchange-traded products that were at the center of the great volatility blowup on Monday.

As the Standard’s & Poor’s 500 index fell 4% on Monday, giving back this year’s gains in a single day, implied volatility—as measured by Cboe Volatility Index, or VIX, which tends to rise as stocks decline—spiked 115%, to 38. That was bad news for anyone betting that volatility would stay low, but worse…

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