The Ups & Downs of Volatility
In financial markets, the connotation of the word “volatility” changes depending on where you’re hanging out. If you’re at a midtown Manhattan happy hour on a Thursday firing back a third scotch on the rocks – volatility sounds like a great thing. But if you’re drinking beer with a doctor, an accountant, and an insurance agent at a backyard barbeque in the suburbs – well, it doesn’t feel so great.
Typically, traders love volatility and investors hate it…
For traders, volatility creates far more opportunities to “scalp” a quick trade. Stocks move intraday, and they can get in and out, making money.
But for investors, it makes it much more painful to hold on to smart investments. It can sometimes even force positions to get closed out prematurely. That usually results in generating a loss or no gain, even if the idea ultimately proved correct.
Regardless of your opinion on volatility, the one thing we can say for sure is that it’s back.
