June 28, 2021
Volatility has flown below the radar for most of 2021. Stock prices are rising and the long-lasting inverse relationship between volatility and stock prices is holding strong. However, major events are looming such as inflation, ending stimulus, and Fed tightening. Now might be the time to unearth some volatility strategies. The first strategy is to buy low-volatility ETF’s like the iShares MSCI USA Min Vol Factor ETF (USMV). Rather than hedge directly against the VIX, this ETF separates factors of volatility in the S&P 500 with the lowest factor rating.
The other strategy is to directly hedge against the VIX. ProShares VIX Short Term Futures ETF (VIXY) directly hedges volatility through short-term futures contracts on the VIX. Finally, you can hedge losses through direct inverse ETFs like the ProShares Short QQQ ETF or Direxion Daily S&P 500 Bear 1X Shares ETF.
FINSUM + Magnifi: If there is market turmoil, bonds won’t provide the countercyclical hedge they normally do if it's caused by inflation. Volatility strategies can be a better hedge for your portfolio.
Other news today: Buybacks Are Back for Big Banks and Large Caps Are the Income Investor’s Low Yield Response
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