There are various ways to trade volatility. You can trade options on the VIX or use a variety of ETFs that are based on the VIX. Some are leveraged and move more or less than the VIX in some specific proportion, like 1.5 times. There are inverse VIX ETFs that move in the opposite direction of the index too. (You can also trade options on these leveraged and inverse ETFs.) Another way to capitalize on volatility is by trading options on stocks or other indexes. When volatility is high, you may want to consider selling options, because high volatility pushes option prices higher. So you could sell puts or calls and capture a significant premium. When volatility is low, you may look to buy puts or calls, because the options should be cheap. Right now, volatility is slightly above the historical average, but it has come way down from previous highs. Though the market has been strong for the past month, it makes sense to position yourself for higher volatility in the near term. There are a lot of risks out there, including economic data, lingering uncertainty about tariffs and other policies, and more. I expect volatility to increase again in the near future. What's interesting to me about trading volatility is that you're not trying to predict which way the market will go - you're trying to predict how investors will behave. And historically, investor emotions have been somewhat predictable... Fear is usually the greatest right near bottoms, and confidence is at its highest when the market is also at its high. You can bet on those widely held emotions and hedge your portfolio or make some big profits without buying a single share of stock. You just need to trade volatility. Good investing, Marc P.S. On Wednesday, I'll be hosting a special live broadcast on a little-known trading strategy that I believe could be a complete game changer. It's perfectly suited to help investors profit through times of heightened volatility. To reserve your FREE spot at my Special Situation Event on Wednesday afternoon, click HERE. |
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