The trade war just got a bit worse.

After weeks of intense fighting between the two economic superpowers, Dow futures are pointing to a 230-point drop at the open today.  All after the press reported the U.S. was considering restrictions on Hikvision – a Chinese surveillance equipment provider – from buying U.S. components.

“The U.S. is considering cutting off the flow of vital American technology to as many as five Chinese companies, reported Bloomberg, citing unnamed sources, “widening the dragnet beyond Huawei to include world leaders in video surveillance. The Trump administration is concerned about their role in helping Beijing repress minority Uighurs in China’s west.”

If that’s the case, the move would mark further escalation in a troubling trade war.

This move could also impact companies like Nvidia (NVDA), Western Digital (WDC), Intel (INTC), and Seagate (STX) – all of which provide computer chips and components to Hikvision.

This comes a week after the U.S. Commerce Department blocked Huawei Technologies from buying U.S. goods, effectively banning U.S. companies from doing business with the Chinese firm, says CNBC.

Unfortunately, none of this comes as a surprise, as the two warring economic superpowers go for the throat.  And, as long as this continues we must be prepared for exceptional volatility, as we’ve noted in these pages.

The Top Ways to Protect Your Portfolio from Market Volatility

With markets sitting at record highs, the question I’ve received most over the last few weeks is, “How do we protect for potential downside if the rally begins to fall apart?”

The best way to trade that possibility is by protecting your portfolio by hedging volatility.

We can use opportunities including:

  •     The iPath S&P 500 VIX Short-Term Futures ETN (VXX)
  •     The ProShares Ultra VIX Short-Term Futures (UVXY)
  •     The VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

Since the start of May 2019, the VXX for example ran from a low of $25 to a high of $32.

The UVXY ran from a low of about $31 to a high of $45.  Even the TVIX ran from a low of $20 to more than $30. All are very likely to see a boost as the trade war intensifies.