VX-CBOE Volatility Index (VIX) Futures

NEW YORK TheStreet -- Want strong returns when the market is on a wild ride and most investors are in selloff mode? Take a look at the VIX. As markets have been plunging over the last days and insecurity is high, it's good advice to take a look at volatility indices. They are great trading tools in a down-turning market.

The VIX is calculated by the Chicago Board Options Exchange CBOE and shows the market's volatility expectations for the next 30 days. Currently, the VIX is the most commonly used method of measuring expected volatility. A VIX value below 20 indicates low volatility. That means prices are not changing very quickly. On the other hand, a VIX above 30 is a sign of high volatility, which means uncertainty is high and there is fear in the markets.

That's why the VIX is often referred to as the "fear index. Due to the latest global sell-off, volatility is currently skyrocketing. Yesterday, the VIX had a closing value above 40 as of August 24, , which has been the highest value since more than three years. Today, it has fallen significantly to about 30 basis points. There are several options to trade the VIX. The simplest approach is to buy Exchange Traded Notes ETN or Exchange Traded Funds ETF on the index.

Futures & Options Trading for Risk Management - CME Group

This product holds long positions in the first and second month futures contracts on the VIX. Hence, if markets are insecure and volatility goes up, the product gains in value. Additionally, there are other products which are structurally similar, but bear higher risk due to increased leverage. CFO John Gerspach said low volatility and a softer trading environment have dampened Citi's bond and equity markets revenue.

VIX decline since the first round of French elections fits a positive pattern. Even without North Korea, there's plenty of uncertainty coming from U. The Trump rally takes a blow on Monday as chaos and confusion surrounding the White House immigration ban sends global equities spiraling. VIX-Linked Products Make It Possible to Gain Directly From VIX Movements There are several options to trade the VIX.

Another strategy is to buy put options during times of low volatility. This way, investors make a bet that markets are overbought and will turn bearish soon. Once the VIX is above 30, investors are panicking and selling their stocks based on fear. That leads to quickly falling stock prices. If the VIX starts to decline, it's a good time for investors to place their buy.

In general, if volatility declines, stock prices will increase. Investors should keep in mind that VIX-linked products are designed for knowledgeable traders who can assess the risk and understand market movements. Traders who are familiar with the concept of volatility and understand the basic structure of the VIX, will find this a great tool to trade in the current market environment. Action Alerts PLUS is a registered trademark of TheStreet, Inc.

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How Traders Can Make a Fortune Trading the VIX and VIX-linked Products -- Right Now - TheStreet

Aug 25, 2: Prev 0 of 2 Next. Jun 13, 4: Falling Volatility Hints at More Stock Gains: Cramer's Off the Charts VIX decline since the first round of French elections fits a positive pattern. Apr 26, 6: Gold Has Plenty of Uncertainty Behind It Even without North Korea, there's plenty of uncertainty coming from U.

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