Volatility has three characteristics.
Cyclical | Persistency | Mean Reversion
Cyclical | Persistency | Mean Reversion
Cyclical : low volatility is followed by high volatility and vice versa
Persistency : it's persistent. Meaning if today is low volatile, expect tomorrow to be low volatile. Opposite is also true
Mean reversion : has the tendency to revert back to mean ( average of say N periods) . So a low volatile regime means mean is higher, sooner or later it will go back to the mean
Moral of the story : Don't get disheartened by this low volatility. Cyclicity and mean reversion says we will revert to a higher volatility. We need a few volatile days for persistency to kick in.
I know option buyers are having a nightmarish time, however this low vol regime with steadily falling vol can be countered by trading spreads. Trading naked will be very very difficult here
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