The Dow Jones Industrial Average ended Friday’s trading session with another roller coaster ride of volatility with a 300-point loss, effectively putting the Dow in the red four out of the past five days. It’s a recurring theme in an October that’s proving to be a volatile month for U.S. equities, but three exchange-traded products (ETPs) have been benefitting from the increased bouts of volatility.
While stocks are on pace for their worst October since 2008 and the S&P 500 now joins the Nasdaq Composite in correction territory, the Commerce Department did report that gross domestic product expanded by 3.5%, beating economic forecasts of 3.4% growth. However, that did little to temper the markets as the Dow fell by over 500 points early in the day.
“The 19.7 percent correction in 2011 is as close to a bear market as we’ve had in recent years. I don’t think we’ll close to that, but I think we’re heading for a deeper correction than the one we had in January and early February,” said Sam Stovall, chief investment strategist at CFRA Research.
As far as whether this volatility can sustain itself, Kenny Polcari, director of O’Neil Securities, says it could be some time before the markets settle down, but until then, these market fluctuations could be the new normal at least for the next couple of weeks.
“I think it’s going to be awhile,” said Polcari. “Because there’s been a lot of technical damage so until the market works its way, we’re going to have these volatile sessions–up one day, down another, back and forth, whipsawing all day long and so I think it’s going to last through the midterm elections.”
If the markets continue to flux the way they have been, investors might need to make volatility their friend starting with the three ETPs below.
1.iPath S&P 500 VIX ST Futures ETN (NYSEArca: VXX): up 5.84% today and 50.7% the past month
VXX seeks to provide investors with exposure to the S&P 500 VIX Short-Term Futures™ Index Total Return. The S&P 500 VIX Short-Term Futures™ Index Total Return (the “index”) is designed to provide access to equity market volatility through CBOE Volatility Index® futures. The index offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects the implied volatility of the S&P 500® at various points along the volatility forward curve.
2. ProShares VIX Short-Term Futures (NYSEArca: VIXY): up 5.87% today and 50.5% the past month
VIXY seeks results (before fees and expenses) that, both for a single day and over time, match the performance of the S&P 500 VIX Short-Term Futures Index for a single day. The index seeks to offer exposure to market volatility through publicly traded futures markets and is designed to measure the return from a rolling long position in the first and second month VIX futures contracts.
3. iPath B S&P 500 VIX S/T Futs ETN (BATS: VXXB): up 5.63% today and 49% the past month
VXXB seeks return linked to the performance of the S&P 500® VIX Short-Term Futures Index TR. The ETN offers exposure to futures contracts of specified maturities on the VIX index and not direct exposure to the VIX index or its spot level. The index is designed to provide investors with exposure to one or more maturities of futures contracts on the CBOE Volatility Index®.
Related: Top 58 Equity Inverse ETFs
For more market trends, visit ETFTrends.com