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When Volatility Doesn't Do What It's Supposed To

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There's circulating fear as gold and currencies get out of range

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So volatility moves inversely of price action, right?

Well yes, except when it doesn't.

Like in the miners here:



Everyone knows to own gold because the dollar is going to zero. And in turn, to own the miners because somebody has to extract all those teeth. So naturally GDX acts quite well.

But so does volatility in GDX, as you can see here:





Thirty-day implied volatility sits near 50 (about the midpoint of it's six-month range), which is pretty impressive considering most other stocks and indices sit near 52-week lows.

And options volatility is more than justified by actual realized stock volatility, which is also around 50 now on the 10-, 20-, and 30-day measurements.

A couple points to make here:

One is that at the end of the day, volatility is about ... volatility, and not simply an inverse to price action like they tell you on TV.

The other point is that we often see strong volatility in a bull move and weak volatility in a bear move, though the latter case is not that common. Volatility is about fear of the unknown, and so long as gold and currencies get out of range a bit, there's apparently some fear of either missing another leg up or missing an about face down.

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