The CBOE Volatility Index, VIX aka the stock market fear gauge, is a popular measure of the stock market’s expectation of volatility implied.
Devesh Shah, an applied mathematician and hedge fund manager who formerly worked for Goldman Sachs, was one of the creators of the CBOE Volatility Index
The VIX is quoted in percentage points and is the expected annualized change in the S&P 500 index over the following 30 days, with a 68% probability. VIX values greater than 30 represent investor fear or uncertainty, while values below 20 represent complacent in the Markets.
Just in the past week, we have seen Fed Powell cut US interest rates in attempt to keep the party going, President Trump issue more tariffs on Chinese goods, 900 DOW stock plunge and what appears to be the start of a currency war.
Experts say there could be lots more bad news to come for stocks this month beyond Monday’s big selloff. That’s because August is typically the year’s weakest month for U.S. equities.
Stock Trader’s Almanac Editor Jeffrey Hirsh blames the month’s historically weak performance woes on summer vacations that take investors’ eyes off of the market. “Everyone is in the Hamptons, out playing golf or in the backyard with the kids,” he said. “So, you get a vacuum of lower volumes, and the path of least resistance is down.”
LPL Financial found that while the S&P 500 hasn’t fallen every August, in the years that it’s done so since 1990, losses have averaged 4.6% — the worst showing for any month during that period.
So any one long the Equity Markets or who have family members with IRAs and/or 401ks, buy some protection and hedge your hard earn dollars. One way to hedge your portfolio is to buy VIX call options if you think volatility in the Markets are going to increase over the next 3-6 months.
And the newest alternative at our disposal as a hedge, is to buy BITCOIN.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.