The Best Ways to Trade the Fear

by | Oct 11, 2022 | Markets

It always pays to use protection.

Investors are panicking. Stocks are plummeting. Fears of recession are circulating. There are issues with Russia, North Korea, and China. Even the International Monetary Fund (IMF) just cut its global growth forecast for 2023, with warnings, “the worst is yet to come.”

And, as noted by CNBC: The IMF also highlighted that the risk of monetary, fiscal, or financial policy “mis-calibration” had “risen sharply,” while the world economy “remains historically fragile” and financial markets are “showing signs of stress.”

We have a bit of a mess on our hands. And it’s not improving.

It’s why we’ve pounded the table on trading volatility. In mid-September, for example, we highlighted opportunities with these VIX-related ETFs and ETNs.

  • ProShares Ultra VIX Short-Term Futures ETF (UVXY) — The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. Since mid-September, the UVXY ran from about $10.35 to $13.51.
  • iPath S&P 500 VIX Short-Term Futures (VXX) — The VXX ETN provides exposure to the S&P 500 VIX Short-Term Futures Index. Since mid-September, the VXX ran from about $19 to $21.85 a share.
  • ProShares VIX Short-Term Futures ETF (VIXY) — This ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration. Since mid-September, the VIXY has run from about $14.75 to $17.67.

With more volatility on the way, these may continue to be some of the best bets.