Trade Alert – More Volatility

by | May 4, 2020 | Daily Trade Alert

After a brief recovery, markets are slipping again over tensions with China.

Dow futures are down more than 300 points this morning thanks to new tensions between the U.S. and China over the origin of the virus.

“It is possible that the US administration feels emboldened to restart the trade rhetoric given the rally stocks have undergone in recent weeks,” said ING’s Robert Carnell, as quoted by Financial Times. “If so, Friday’s S&P 500 sell-off comes as a reminder that the underlying drivers for markets have not changed.”

Oil prices are pulling back on that tension, too along with concerns of a persistent oil glut. “As oil inventories are likely still increasing over the coming weeks, oil prices remain vulnerable to renewed setbacks,” said UBS analyst Giovanni Staunovo, as quoted by Reuters.

With volatility making a big comeback, we’re reiterating a buy on the three volatility trades we issued on Friday. All are already moving higher, and include:

ProShares Ultra VIX Short-Term Futures ETF (UVXY)

The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. On Friday, the UVXY opened at $47.26. It’s set to open this morning at $49.65, and could explode to $55.

VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

The TVIX is another great way to trade elevated volatility. This ETF tracks an index of futures contracts on the S&P 500VIX Short-Term Futures Index. On Friday, the TVIX opened at $226.50. It’s set to open at $241 this morning.

iPath S&P 500 VIX Short-Term Futures (VXX)

As volatility returns to the markets, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return. On Friday, VXX opened at $41.09 and is set to open at $42.54. It could run to $50, near-term.

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