On Friday, in a market situation report at Top Gun Options, Head Trader ‘Whiz’ Buckley gave this near term advice, ‘Get Skinney equities and Long Volatility’. Translated this means, as we head into election week, it may be uncertain which candidate will win and which direction the market will move, but an increase in volatility is almost guaranteed.
If you’re a sailing enthusiast this phrase means ‘batten down the hatches’! If you simply want to survive the current layers of financial uncertainty, it means you should have a smaller percentage of your portfolio in stocks, plus some have hedging protection based on volatility. Trades based on volatility could be setup to increase in value if your stocks decrease in value.
At Top Gun they preach ‘be sure to hedge’ and recently outlined very specific trade methods that can benefit from an extreme market crash and the resulting spike in volatility. The VIX is the primary bell weather that measures the increase/decrease in the range of movement of Futures on the SP500 index.
The range of movement over time is volatility and has a significant impact on the value of options on the underlying index or stock. Understanding this one relationship can provide the foundation for profitable trading and for protecting your portfolio with market hedges.
For more information on options training and trading volatility to weather the current financial markets, contact Support at Top Gun.