Short volatility strategies that delivered a reliable source of yield in recent years look set to lose traction in the coming months as uncertainty surrounding the Federal Reserve's tightening plan threatens to shut the door on the low volatility regime. The (ⅥⅩ) index of S&P 500 volatility spiked in August as concerns surrounding China's economic slowdown and the government's decision to loosen the renminbi trading band sent shockwaves through global equity markets. Net positioning in futures contracts linked to the volatility index hit its most positive level in September, with longs outpacing shorts by almost 38,000 contracts according to CFTC data for non-commercial positions.
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