The market is a strict teacher - and yet many short sellers seem to repeatedly ignore its lessons. This was particularly evident during the escalation of the trade conflict in April: April 7 marked the peak of uncertainty on the markets. Volatility skyrocketed and the VIX - the benchmark for expected fluctuations on the US stock market - climbed to over 60 points. This was a level last seen in the 2008 financial crisis or during the coronavirus crash. This was a real test for short sellers. But instead of seeing this extraordinary market phase as an opportunity, many got into serious difficulties. Why is that?<\/p>\n\n\n\n
When volatility rises sharply, option prices also skyrocket - especially for put options. For those who had sold puts en masse in calmer times (low VIX), this increase meant severe book losses. In many cases, this was followed by Margin calls<\/a> and forced liquidations, often associated with painful losses.<\/p>\n\n\n\n At the same time, such an environment offers enormous earnings opportunities: those who are liquid and not overleveraged can sell puts at greatly increased premiums. Even on conservative buy-and-hold shares, premiums of over 20% were paid on the potential put amount during this phase - a dream come true for professionally positioned writers.<\/p>\n\n\n\n But instead of acting anti-cyclically, many retreated. Why were so few able to profit from this market phase?<\/p>\n\n\n\n