Places to Hide in a Stock Market Crash: Volatility Products
Market volatility is as low as it has been in many years, as traders have basically said they aren’t worried about this market. Yet when the next big pullback/correction/crash hits, the volatility is likely to strike out like a coiled rattlesnake.
Fortunately, there’s an ETF that allows us to buy volatility, and it’s the iPath S&P 500 VIX Short Term Futures ETN (NYSEARCA:VXX). This fund gives investors exposure to the S&P 500 VIX Short-Term Futures Index Total Return, which basically measures market volatility through CBOE Volatility Index futures.
Interestingly, investors have been buying VXX despite its recent underperformance (down about 39% year to date), as fund inflows have boosted the number of shares outstanding to record levels. So, it seems like there are some smart contrarians now locking in bets at what has been historically low volatility levels.