Time To Buy Volatility?

In a few recent articles I talked about the strength of the US stock market recovery. Many indices displayed a V-shaped pattern.

In other words, market fear is falling. With it, most of the volatility measures. The Nasdaq 100 Volatility Index, for example, is now at its lowest since Oct-2018. It peaked above 38.0 two months ago. Currently, the index is trading near 18.0 (see Featured Chart). I also talked about how to use volatility products earlier here.

Could now be the time to initiate some long volatility positions? I may be too early on this. The rally in equity markets is showing no signs of buckling (yet). But dark clouds are gathering. Corporate earnings were a mixed bag; no-deal Brexit is still possible; while macro data are not hugely inspiring. Exports from Japan to Germany are down.

Therefore, some long positions in volatility may be warranted, such as Barclays iPath Short-Term S&P500 (VXXB). Watch to buy some on declines. The thing about volatility is that it surges like a rocket. By the time you wish to establish a position – when stocks are falling – the vol market may have already trended up.  Therefore, the vol hedge need to be made early.

You can compare the best CFD brokers for trading VXX here or take a look at the individual reviews for brokers below:


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