Stop/loss undermined by volatility

Rigid stop/loss programmes proved ineffectual over the past two months, as extreme volatility in the markets led to stock price changes after markets closed.

The situation has led fund of fund managers, and the underlying managers themselves, to widen risk assessments to a portfolio-wide level. October record highs from the Chicago Board Options Volatility Exchange (VIX), saw some US stocks trade up to 30% off their evening close, causing managers to mitigate risk with non-stop loss strategies.

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