2020 has been one of the most volatile years on record.
- Tensions with China are at an all-time high
- Tensions with Iran are boiling over
- The coronavirus is still making its way around the world
- There are protests and riots in the streets of the U.S.
- There’s sizable economic slowdown fear, which is sending gold to all-time highs
- The Shiller PE ratio now sits at Black Tuesday higher of 30
- Businesses are failing at a staggering pace. At the moment, 24.5% of small businesses in the U.S. are closed, according to Jefferies.
Yet, markets have shrugged off a good deal of that news.
In fact, over the last few months, the Dow has roared from a low of 18,213 to 26,546. The S&P 500 ran from 2,191 to 3,232. The NASDAQ exploded from 6,631 to 10,475.
But it’s only a matter of time before the optimism gives way – especially as we near the U.S. elections, which are notoriously known to be wildly volatile.
2000: Bush v. Gore — Ahead of the election, the volatility index (VIX) exploded from a low of 16 to more than 31.
2004: Bush v. Kerry — The VIX ran from a low of 13 to nearly 17 ahead of the election.
2008: Obama v. McCain — The VIX exploded this year from a low of 20 to a high of 90, as the Dow plummeted with the subprime fiasco.
2012: Obama v. Romney — This year, the VIX jumped from 13.2 to nearly 20.
2016: Trump v. Clinton This time, the VIX popped from a low of about 12 to more than 22 heading into the election.
With the chaos bulleted above, coupled with near-term election volatility, investors should position themselves for a likely spike in the VIX.
Three of the best ways to do just that include owning:
ProShares Ultra VIX Short-Term Futures ETF (UVXY)
The 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)
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)
The VXX ETN provides exposure to the S&P 500 VIX Short-Term Futures Index.