How To Protect Against A Rise In Volatility

It has become an issue that risk conscious investors must consider. An increasing number of investors are piling into the short volatility trade today. They are doing so the same way that people were flipping houses a decade ago and buying up tech stocks at the turn of the millennium with the perception that shorting volatility is a cannot miss money printing machine. And many are doing so with leverage. Unfortunately, those who are flooding into the short volatility party are doing so at a time when the CBOE Volatility Index, or the VIX, is already at historical lows. All of this raises an important question. What does the average investor need to do, if anything, to protect against the inevitable rise in volatility, and thus the unwinding of this short volatility trade, at some unknown point in the future?

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Published by Eric Parnell

Registered Investment Advisor

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