Market Volatility
Trading volatility is a common theme amongst traders. Trader beware, however. Trading volatility has a negative long term expectation because the average stock has upward movement, on the average, and volatility mainly targets falling prices. If you are looking for a short term trade, however, trading the volatility of a stock can be a very profitable experience for you.
Volatility has become a popular thing to trade, making it its own class of asset just like Forex Arbitrage. There are now basket funds out there that are centering themselves around the sharp movements that many stocks are now experiencing. ETFs that target volatility might be looking for stocks that are likely to experience sharp downward movement and will take a short position, or they might be trying to make a quick profit off of a stock that rebounds late in trading sessions. Either way, volatility trading can be a good addition to your trading portfolio.
Volatility trading is used by many people as a hedge against future catastrophic losses. But this type of trading does not need to be used only by the super rich within their hedge funds. You can take advantage of volatility even trading on the smaller scale. With funds like VIX out there, you can trade an index’s volatility. This fund revolves around the S&P 500’s movements and has seen plenty of movement itself over the past year. It’s ranged from below $15 per share all the way up the $48 per share. If you want to take advantage of these crazy times, trading volatility might just be what you are looking for.