Volatility

Volatility funds and ETFs are designed to offer investors and traders a... Volatility funds and ETFs are designed to offer investors and traders a way to benefit from a rise or fall in equity market volatility. Market volatility tends to increase in times of turbulence, and a long position in an equity fund can represent either an outright bet by an investor, or a hedge against other parts of their portfolio. A short position, on the other hand, can be a bet that equities are set to rise, or a hedge against an existing short position. Volatility Funds and ETFs typically seek to achieve their objectives by entering into derivatives contracts tied to the VIX Index, which measures the implied volatility on the U.S. stock market. Typically, a low VIX (under 20) indicates market complacency or lack of fear, while a high VIX suggests investors are worried. Volatility funds are not for the faint of heart (especially leveraged ones). They are only appropriate for sophisticated investors and traders willing to take on a fair bit of risk. Last Updated: 11/04/2024 View more View less

Volatility funds and ETFs are designed to offer investors and traders a way to benefit from a rise or fall in equity market volatility. Market volatility tends to increase in times of turbulence,... Volatility funds and ETFs are designed to offer investors and traders a way to benefit from a rise or fall in equity market volatility. Market volatility tends to increase in times of turbulence, and a long position in an equity fund can represent either an outright bet by an investor, or a hedge against other parts of their portfolio. A short position, on the other hand, can be a bet that equities are set to rise, or a hedge against an existing short position. Volatility Funds and ETFs typically seek to achieve their objectives by entering into derivatives contracts tied to the VIX Index, which measures the implied volatility on the U.S. stock market. Typically, a low VIX (under 20) indicates market complacency or lack of fear, while a high VIX suggests investors are worried. Volatility funds are not for the faint of heart (especially leveraged ones). They are only appropriate for sophisticated investors and traders willing to take on a fair bit of risk. Last Updated: 11/04/2024 View more View less