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The Chicago Board Options Exchange Volatility Index, – that's the VIX to you and me – has been "elevated" lately, to put it mildly, since hitting a monthly high of 24.59 in early August. It opened yesterday morning at 20.18 and spent most of the trading day above 19. To put that in perspective, the VIX average close was 16.64 for all of 2018 and a placid 11.09 for all of 2017.
We're seeing big, powerful intraday swings in volatility, which tells you that the market's all-important "narrative" is in flux. It means we're in an extremely headline-driven time right now, where the tension and interplay between the Federal Reserve narrative and the Trump tariff tweets narrative has stocks gyrating wildly – as we saw so vividly illustrated on Friday.
So it's perfectly understandable if you just wanted to shut your eyes till it's all over. But if you do that, you run the real risk of missing out. Because these big, scary swings we're seeing lately – 300, 500, 600 points or more – are really powerful moneymaking opportunities.
In other words: If there's no volatility, there can be no profits. Volatility means swings up, too. Nimble, situationally aware traders and even long-term buy-and-hold investors can absolutely clean up at times like these.
About the Author
Nationally recognized technical trader. Background in engineering, system designs, and risk reduction. 26 years in the markets.