This bear market rally has taken all of us for a ride. The S&P 500 is now up 11% since mid-July and I am seeing some investors relax a bit - maybe a little too much. Especially now that the CBOE Volatility Index (VIX), a unique measure of market volatility, is plumbing a 20 handle (its 20-year average). It actually dipped below that earlier this week, but is holding steady right around 20 as of this writing.
Seeing it fall below its 20-year average may be encouraging some to bring money back into the stock market, but what I'm seeing is a different opportunity altogether.
See, the VIX's value fluctuates with volatility - it falls when things stabilize and goes up when volatility rises.
The thing is, we haven't left behind all the factors that have led to so much chaos this year. Inflation is easing, but we're a long way off from where we need to be. The Fed is likely to continue bumping interest rates and being aggressive about it, and there are a lot of reasons why energy prices may suddenly spike again.
Point being, the rally we've had is probably not going to last. And that means the VIX won't stay this low for much longer.
So what we have here is a great opportunity to get ahead of the game and take a nice ride as it climbs again.
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As I said, we've enjoyed a bit of a rally, but we're not out of the water yet in terms of the overall bear market. For those who've already taken a bunch of losses this year, you may need to rebuild your portfolio in record time.
I've got three trades right now that are perfect for this. They're my version of fire insurance - the best cheap trades I can find right now with the best potential for safe returns.
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About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.