These 3 Volatility Trades More Than Doubled in Days

These 3 Volatility Trades More Than Doubled in Days

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Schools are shuttering. Sports teams are playing to empty stadiums. Cities are cancelling events and businesses are closing as markets plunge to historic lows. Fear is so out of hand, the CBOE Volatility Index (CBOE:VIX) exploded to 83 before settling around 75.

All this because of the coronavirus story, as the World Health Organization (WHO) declares we have a pandemic on our hands. There are now 4,226 cases in the U.S.  and at least 75 people have died, per the Centers for Disease Control on March 17.

“I can say we will see more cases and things will get worse than they are right now,” Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said on March 12.

Unless you’re on the short side of the market, some of the safest bets during the current pandemic have been in volatility, as I’ve noted before.

In fact, as I told you on Feb. 27, these are the top three volatility stocks to own.

Top Volatility Trade: ProShares Ultra VIX Short-Term Futures ETF (UVXY)

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My first pick is the Pro Shares Ultra VIX Short-Term Futures ETF (NYSEARCA:UVXY). This ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index.

In that original article, I said “Should things worsen with virus, I believe we could see $22, near-term.” And I noted that the thesis would be even stronger if the coronavirus made its presence felt in the United States.

That was on Feb. 27, as UVXY traded at $20.  As of March 17, UVXY is now up to a whopping $91.30.

So is this trade out of gas? I don’t think it is yet. Should markets drop even further, potentially testing 2016 lows, I believe the UVXY could run to $110 a share, near-term.

Top Volatility Trade: Velocity Shares Daily 2x VIX Short-Term ETN (TVIX)

My next choice is actually an exchange-traded note (ETN). The Velocity Shares Daily 2x VIX Short-Term ETN (NASDAQ:TVIX) tracks futures contracts on the S&P 500 VIX Short-Term Futures Index. That’s the same index as the UVXY above.


“Should virus headlines worsen, I believe it could rally to $80,” I noted in my original article on Feb. 27.  At the time, TVIX traded at just $86.50.  It’s now up to $610 a share, and is surging higher.

So what does the future hold? No one knows for sure, but with so much fear in the market, I wouldn’t be shocked to see TVIX near $800 by next week.

Top Volatility Trade:  iPath S&P 500 VIX Short-Term Futures (VXX)

The iPath S&P 500 VIX Short-Term Futures ETN (AMEX:VXX) is the final pick in this trio. It provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return.

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“Prices could rally to $20 near-term as markets crater.” I noted.  That was back when the VXX traded at $21.  It’ now up to $60.77.

With the VXX ETF, I believe we could actually see a test of $80 a share shortly, as coronavirus fears grow worse. Not bad in any market, and especially good for a time of such uncertainty.

While these have all exploded higher, I believe we could see even higher highs, as the virus story continues to spread.  Until it ends, volatility will spike.

Ian Cooper, an contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.

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