Shopping for Fire Insurance During a Hurricane

With the Volatility Index back down to a bargain $18, I am getting deluged with emails from readers asking if it is time to start hedging portfolios one more time and buying the iPath S&P 500 VIX Short Term Futures ETN (VXX).

The answer is no yet, but soon, possibly very soon.

They are inquiring at absolutely the wrong time.

And here is the problem. When the (VIX) rises, it usually spikes straight up, and then right back down again. This time, it spiked, but has since hung around the $20 level all year rather than collapse back down.

That suggests that there is another leg up to go in volatility until it hits $40 or more before it takes a much-deserved break. That means the stock market has one more sharp selloff left before we hit bottom and bounce.

Markets can ignore trade wars, rising interest rates, the Ukraine War, and international political instability in Taiwan for a while, but not forever. When the time DOES come to pay the piper, prices and volatility will rocket.

Which all brings me to the subject at hand.

If you are new to the service and have no longs, you probably should skip this trade and just watch it as a learning experience.

This can also be a great hedge for any long positions we may want to add in the coming weeks, such as in “peace,” or technology plays.

As I never tire of telling people, no one ever complains when they buy fire insurance and their house doesn’t burn down.

If you are new to this service, don’t freak out. My daily research newsletters are not always about exploring the esoterica of options, or volatility trading.

I’ll let you know when I’m ready to pull the trigger with a Trade Alert.

I am always trying to get better prices.

If you are new to the (VIX) game, please read the educational piece below.