Play the S&P 500 Volatility With These 2 ETFs | ETF Trends

Bank collapses and interest rates are more than enough to inject a dose of volatility into the stock market, particularly the S&P 500. Within the past month, the CBOE Volatility Index (VIX) is up almost 10%, paving the way for leveraged/inverse exchange traded funds (ETFs) that focus on the S&P 500.

When volatility strikes, it can be especially stress-inducing for an investor. Losing an element of control, such as the stock market, could cause rash moves and portfolio modifications when it might be better to simply stay the course.

“In the months ahead, volatility may come and go,” Vanguard global chief economist Joe Davis said. “And for all of us, I think it’s important to remember to focus on what we can control.”

Many market experts adhere to the notion that it’s almost impossible to time the markets. As mentioned previously, sometimes the best action is inaction — simply staying the course while the market plays itself out.

“Staying the course is the play, because we can’t predict what’s going to happen this year, next year or in a decade from now,” Douglas Boneparth, president and founder of Bone Fide Wealth, a wealth management firm based in New York City, said.

“As retail investors, what can we do? We can focus on the things that we can control,” Boneparth added.

That’s not to say that investors are simply shackled to the whims of the market. With the help of leveraged and inverse ETFs, traders in particular can play both the bullish and bearish sides when volatility strikes. As such, they can use this extra volatility the markets are experiencing to their advantage.

2 Funds to Trade Volatility

Central bank decisions on interest rate policy should give the markets plenty of movement. How hawkish or dovish the Fed wants to be over the next year or so should give traders plenty of fodder to work from in terms of market fluctuations, especially in the S&P 500.

For bearishness in the S&P 500, traders can use the Direxion Daily S&P 500 Bear 3X ETF (SPXS). SPXS seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.

On the flip side, when the S&P 500 rises, traders can play to the upside with the Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL). Both ETFs offer thrice the leverage, so only seasoned traders should use these products.

For more news, information, and analysis, visit the Leveraged & Inverse Channel.