there is a report circling from JP Morgan’s quantitative team that highlights the potential for some significant selling ahead based on option and derivative positioning by trading accounts such as CTAs (commodity trading accounts), Risk Parity portfolios and Volatility Managed strategies. The report reads like a math treatise and easily undermines anyone’s belief that investing is all about buying good companies at good prices.
The upshot of the report is that more wild down swings (like Monday’s 1100 point drop) are ahead. There is one glimmer of hope in the article is that some of these positions could be the first to reverse (that is start buying) when volatility declines. This report is being given some attention because a similar report was distributed last Friday that essentially laid out the events for Monday.