Hedge Fund That Made 60X Return on Volatility Now Takes Opposite Position

Austin, TX based hedge fund Houndstooth Capital Management earlier made a 6000% return by betting on volatility. They did this by betting against an ETF linked to low volatility.

Now, however, Houndstooth is betting on the opposite. Sort of. They aren't actually betting volatility will stay low, but instead have targeted a weakness or design flaw inherent to ETFs like ProShares Ultra VIX Short-Term Futures ETF.

According to Bloomberg, "The theory is that after an initial spike there will be a snapback in vol that will decimate the product." In fact, Houndstooth thinks after a large spike in volatility, the snapback could decimate the product in a matter of hours or days.