Get Ready for the Next VIX Wind-up

Even though the major indexes were soaring today, with the S&P 500 up 1.08% and the Dow up 1.19%, volatility could be around the corner with the VIX showing higher lowers on the monthly chart.



Buying XIV or SVXY right after the VIX has spiked can yield nice returns, as long as you are not borrowing money to make the trade.  It's wise to only allocate 10-15% of your portfolio to riskier trades like this.

Setting the Bar for VIX Trades

Looking at 2016, for most of the year, when the VIX spiked above 15, it was back down below that bar very quickly.  The month of June was an exception.

Timing inverse VIX investments
(XIV and SVXY)
Keep an alert active in your stock market tracker to let you know when the VIX goes over 15, especially if you are not watching the market every day.  Chances are you can make a nice gain within a week or two if you purchase an VIX inverse.  The best gains are made when the VIX goes over 20, because it rarely stays above that level for a week (barring economic crisis environments or extreme fear).

This is the last one year cycle for XIV (inverse VIX  fund).  There were about 6 opportunities to make large gains (so far in 2016) in a short period of time:
February 10-11
June 14-16
June 24-28
Sept 13-20
Oct 13-17
Nov 2-4

XIV appreciation over five years.

Unlike VIX funds, XIV actually appreciates over time (because of the decay of VIX futures), so if you don't buy in an extreme peak, you could probably cash out within a few months.

Winters seem to be a time of opportunity to buy XIV when it tumbles.

Jan 31-Feb 5, 2014
Dec 10-16, 2014
Dec 31-Feb 11 (2014-2015)

Dec 10-11, 2015
Jan 4-21, 2016




Timing VIX funds 
(TVIX, UVXY, VXX, VIXY)
This is a much harder strategy because these funds cannot be held for long term gains. Never go long on VIX funds.  They are not based on the current VIX level, but rather VIX futures.  It's best to buy TVIX or UVXY when the VIX is below 13 and then sell at the very first spike after the purchase.

Holding any VIX fund for any time period greater than a few weeks is usually not wise, because the VIX funds experience exponential decay over time.

Just before the election: Why the Market Will Soar on Monday

If you're betting that Hillary Clinton will win as expected, put some capital into inverse VIX products (XIV and SVXY).  During the first week November, the VIX soared to over 20 to close at 22.51.  If Clinton wins, the VIX will probably come crashing down.

Why the market will soar on Monday, November 7th, 2016
No charges after new FBI review of Hillary Clinton emails

Impact of Uncertainty Is Likely to Ease After Election Day (WSJ)

XIV closed at 33.28 on Friday, 11/4, but it's likely that with inevitable VIX decay (and a Clinton win) that it will go above $40 before the next significant VIX spike that pummels the price of XIV.

However, if you're betting against the grain that Donald Trump will win, you could short some of the indexes by purchasing SQQQ, SDOW, .  To protect yourself against significant loses, you may want to put some funds into the inverse of the shorts and also inverse VIX instruments.

3 month XIV chart (inverse VIX) leading to November 7th (Monday).