How Investors Doubled their Money as the Dow Plummeted

We were well prepared for volatility.

In fact, on February 19, 2020, we noted that some of the top ways to prepare for volatility was to buy into these opportunities.

  • ProShares Ultra VIX Short-Term Futures ETF (UVXY) -- As volatility ticks higher with the trade war, ETFs such as the UVXY run higher. ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index.
  • VelocityShares Daily 2x VIX Short-Term ETN (TVIX) -- The TVIX is another great way to trade elevated volatility.  This ETF  tracks an index of futures contracts on the S&P 500 VIX Short-Term Futures Index. As volatility ticks higher, the TVIX ticks higher.
  • iPath S&P 500 VIX Short-Term Futures (VXX) - As volatility returns, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return.  In simple terms, as volatility shoots higher, so does the VXX.

To date, the UVXY exploded from $10.72 to $23.78.  The TVIX ran from $39.25 to a current price of $109.61.  The VXX jumped from $13.56 to $23.43.  If you took advantage of those opportunities, it’s a good idea to sell half of each to secure wins to be safe.

The Dow Jones Could Sink to 24,000 on Fear

From here, markets could fall even more, as fear rages out of control.

All hopes for upside were dashed after a second coronavirus death was reported in the U.S.  in Washington State. At the moment, the number of confirmed cases in the state stands at 13 with those two unfortunate deaths.

We’re also seeing cases in California and Oregon, raising fears of person to person transmission of the virus. A case popped up in the New York City, as well.

Granted, there’s growing consensus world banks, including the U.S. Federal Reserve will cut rates to prop up the economy.  In fact, in the U.S., Goldman Sachs believes the Fed will cut by 50 basis points.  Unfortunately, that may only provide a temporary reprieve for a market controlled by fear of a spreading, unstoppable virus.

As long as your portfolio remains hedged for volatility, you should be okay.