One of the best ways to make money is by watching the Volatility Index (VIX).

In fact, every time it pulls back to around 25 these days, you’re being offered an opportunity.
That’s because – at the moment, 25 is our sign of market complacency.

It’s part of the reason we highlighted the UVXY, TVIX, and the VXX as buys on July 27.

As many of us are painfully aware, calm can give way to panic quickly.

We saw that on Thursday when the Dow plummeted 500 points on Q2 GDP reports. Plus, with chaos still brewing with China and Iran, global economic fears, central banks flooding markets, and nearing U.S. presidential elections, fear could easily return to cripple the markets.

In addition, many of us aren’t well prepared for a potential pullback.

Investors aren’t preparing for the “what if.”

At the moment, there’s far too much optimism.

The same levels of optimism that sank the markets in 1929, 2000, and 2008. And unfortunately, just as we saw then, more of us are far more concerned about FOMO than we are about the real possibility of another crash.

Between 1923 and 1929, the Dow soared about 300%. Believing markets could only race higher, overly optimistic investors chased it to unjustifiable valuations.

Not long after, the Dow would lost 86% of its value.

In 2000, dot-com optimism sent the Dow Jones to nearly 11,750. Not long after, the index would plummet to 9,731.

In 2008, ridiculous optimism sent the Dow to 14,038 on the heels of a housing boom. Stocks exploded on economic optimism and unjustifiable valuations.

Shortly after, the Dow would sink to 6,500.

Even today, stocks are soaring on high levels of optimism and unjustifiable valuations – both of which are unsustainable. For those reasons, your best bet at the moment is to hedge for downside with the volatility trades we mentioned.

Popular Content