CBOE Volatility Index (VIX-I)

How do you trade it? You have to get it perfect or you don’t make a lot of money on these things.

This is a high-stakes game and a risky one, because it is trading on volatility. If you like to gamble, you can play this, but if you are a more conservative investor, stay out.

This is down at some historical levels. We are within a breadth of that level we had seen in 2007 where it had exploded. Whether it is an investment for you or an indicator, it is a fast twitch. Graph shows it just broke down through the band a little bit to $11.36. If you go back 6-7 years, it’s very close to the $11.08 back in 2007. To invest in it, it has been a decaying instrument. He would make much of this until it got about $15.

To trade this as an investment is a really tough thing. He watches this, but only as a proxy. The thing with any of these units you have to remember is that they have an element of decay about them. There is going to be big volatility in any of these trades. Right now this is showing some upside move, but it does not stay there very long.

Doesn’t know the seasonality on this but can give you guidelines. This is based on the volatility of markets. Every time you see this spiking over 20%, that tells you the market is going through a fear phase and has a bit of a problem. This tends to give you an opportunity to be a buyer. This tends to see more volatility in the summertime, from May to October.

This is an ETF based on the volatility of the S&P 500. This is not a long-term investment. He uses this when he thinks things are getting overheated or under heated and doesn’t want to necessarily be making a directional call. Volatility has been trading at low levels for quite some time but has a nasty habit of popping up and you never really know when it happens.