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Trade Alert – Volatility Plays

by | Apr 1, 2020 | Daily Trade Alert

Futures are under pressure again thanks to the spread of the coronavirus. Last check, there are now 874,081 global cases with 43,291 deaths. In the U.S. alone, there are 189,633 cases. In Italy, 105,792. In Spain, 102,136. In China, 82,359.

Worse, Double Line Capital CEO Jeffrey Gundlach says the coronavirus sell off is not over yet. “The low we hit in the middle of March … I would bet that low will get taken out,” Gundlach said, as quoted by CNBC. “The market has really made it back to a resistance zone and the market continues to act somewhat dysfunctionally in my opinion. Take out the low of March and then we’ll get a more enduring low.”

The best way to trade this madness is to again buy the TVIX, UVXY, and VXX at market prices.

ProShares Ultra VIX Short-Term Futures ETF (UVXY) — As volatility ticks higher, ETFs such as the UVXY run higher. ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index.

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 500 VIX Short-Term Futures Index. As volatility ticks higher, the TVIX ticks higher.

iPath S&P 500 VIX Short-Term Futures (VXX) – As volatility returns, 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. In simple terms, as volatility shoots higher, so does the VXX.

Until the situation is under control, markets will remain incredibly volatile.

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