Do You Know How to Trade the VIX?

VXX and VXZ Options

As complex and flawed as these proxies are, I would much sooner trade options here than on VIX futures. They are regular American-style exercise options, with delivery of the actual VXX or VXZ ETN.

OK, got all that? You won’t be tested, but let’s review:

* If you want a look at the here and now of implied volatility, use the VIX.

* If you want a view of “mean” assumptions, use VXV.

* If you want to actually hedge a portfolio, I’d always recommend making life easier and using actual SPX or SPDR S&P 500 (NYSE:SPY) options.

* But if you want to just trade volatility, I believe VXX and VXX options are the best proxy out there.

Follow Adam Warner on Twitter @agwarner.