A New Wave of Stock Market Volatility Could Be Right Around the Corner. What to Do.

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Major market corrections have historically occurred in October, but there are other reasons to be concerned right now. We spell it out.

The world is on the verge of a volatility eruption. At least that’s what Goldman Sachs is telling its clients.

The impetus for a rerating of risk—and a potential decline in stocks and an increase in options volatility—could arrive in October, according to John Marshall, Goldman’s derivatives strategist. In October, Marshall noted, corporate management teams are under heightened pressure to meet full-year earnings expectations because time is running out. Investors who manage money for other people also confront the tyranny of time. If they have failed to satisfy annual performance goals, they are under intense pressure.

To profit from the anticipated disruption, Marshall has advised clients to consider buying October call options on the Cboe Volatility Index, or VIX, to hedge portfolios against expected stock market weakness.

 

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