The “VIX,” or our market’s “fear gauge,” is on the rise again as stock markets take a dive on renewed global volatility. If volatility continues it may be an indicator that equities could head further south, and VIX-related exchange traded funds (ETFs) can be a hedge strategy that is now available for the average investor.
The Chicago Board Options Exchange Volatility Index (VIX) took a reactionary surge to the S&P 500’s decline, report Jeff Kearns and Nikolaj Gammeltoff for Bloomberg. The VIX is up 8.2% to 21.88, which is above the 20 point level where investors discern bearish from bullish sentiment, which also gauges investors’ fear about the future. [VIX ETF and ETN Options for Volatile Markets.]
VIX options trades have recently surged 1.7 times the four-week average and 2.3 times the level for puts. Options strategists at Susquehanna Financial Group LLP believe that “investors appear to be positioning for a significant increase in volatility.”
The number of VIX products has exploded in recent years. The two ETF options track mid- and short-term VIX futures: ProShares VIX Short-Term Futures (NYSEArca: VIXY), which is up 19% in the last month, and ProShares VIX Mid-Term Futures (NYSEArca: VIXM), which is up 13.2% in the last month.
Before the ETFs hit the scene, however, there were a number of ETNs through which investors could get their exposure, including iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX), iPath S&P 500 VIX Mid-Term Futures ETN (NYSEArca: VXZ), VelocityShares Daily Inverse VIX Short-Term ETN (NYSEArca:XIV), VelocityShares Daily Inverse VIX Medium-Term ETN(NYSEArca: ZIV) and UBS E-TRACS Daily Long-Short VIX ETN (XVIX).
VXX has crossed its 50-day moving average.
For more information on the VIX, visit our VIX category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.