Traders usually take off Thanksgiving week. Volatility traders might want to reconsider. Since 2000 the volatility of the week has been consistently above long term VIX levels.
Thanksgiving week has contained some wild events:
- Dubai’s default in 2010
- The tail end of the Lehman Brothers collapse (see 2008)
- Volatility shockwaves from the Euro crisis in 2011, this was right before the announcement of Operation Twist and the ECB’s 3-year LTRO
Since many people are away from their desks there is less liquidity to absorb volume. Thus we tend to see exaggerated moves and heightened realized volatility.
Note the spike in volatility in 2008 and the subsequent unraveling of what was a consistently profitable trade. Since 2009 the average weekly thanksgiving return is -0.4%, while average annualized volatility is around 40%