Taking advantage of low summer volatility

OK, so it's not as snappy as "sell in May and go away", but "short volatility in April and come back in a few months, probably around July, before it all, possibly, kicks off again in the autumn", could be just as apposite.

Jordan Kotick, head of cross asset strategy at RBC Capital Markets, has crunched the numbers on the popular volatility gauges for US stocks and bonds and found average daily values (ADV) tend to be lower from April through much of the northern hemisphere summer.

The ADV of the CBOE Vix index, which tracks volatility pricing on the S&P 500, has its four lowest months of the year from April to July inclusive.

The Vix ADV is more than 22 during October and drops to just above 18 in July.

The MOVE index, which is a volatility measure for the US Treasury market, also spikes in October, hitting around 105, while the lowest month of the year, which is May, has an ADV of about 95.

So selling volatility now may prove fruitful, yes? Well, of course it's not that simple.

First off, the average level of the Vix in recent years has been much lower. It's already trading around 13. Of late, it has proved more profitable to go long equity volatility when investors seem this sanguine.

Similarly, the MOVE index is now about 73. That's in the middle of its range for the last 12 months but, given the summer may be filled with speculation the Federal Reserve might raise rates in September, again going long the MOVE seems more sensible.

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