What to Buy in a Volatile Market

The government is not the only thing that can take your Liberty.

Mr. Market also has a big say in your personal freedom.

There’s no doubt stocks are on a roll. It’s been a good year to get rich – a good year to gain some Liberty.

We’re still a few weeks shy of 2017’s halfway mark, and the S&P 500 is already up by close to 10%. It’s done in a few months what normally takes an entire year.

Investors are excited.

They should be. There are some incredible opportunities out there. (Manward Trader subscribers, for example, locked in yet another triple-digit gain on Friday.)

But as we’ve written before, Mr. Market works on just two emotions… fear and greed.

Clearly, greed is on top these days. Fear is nowhere to be seen.

But like the thunderheads building just beyond the horizon, fear tends to make sneak attacks. The stock market won’t stay this calm for long.

You should be prepared for the storm.

AN OMINOUS FORECAST

There are several obvious reasons fear could suddenly soar.

  • A Trump washout (Washington isn’t exactly hospitable to the current administration)
  • Rising tensions with North Korea
  • Terror attacks in the U.S.
  • Increased heavy-handedness from the Fed.

But really, it doesn’t matter. We can’t predict what will stir the markets… nor do we need to.

We merely need to understand that when fear rises, there’s one thing that happens with the utmost reliability. We’ve seen it over and over.

It almost always leads to a big profit opportunity.

You see, stocks don’t go up in a straight line… and they don’t fall in a straight line.

With nearly a decade between us and the stock market recession that started in 2007, it’s easy to falsely recall stocks plunging seemingly overnight.

But that was far from the case.

As fear surged, so did volatility. One day Wall Street panicked about Bear Stearns… the next it celebrated a solution. Then it went south on news of trouble from Fannie and Freddie… then it soared as Bernanke promised a solution.

Up… down… up… down… up… down.

Sure, most investors remember only the downside. That’s because they used just one strategy… and it works only when stocks go up.

But investors prepared to use another strategy actually made money during the mayhem.

PLAYING THE FEAR

You see, as market volatility soared to record highs in 2008, it didn’t matter which direction stocks were headed. As long as they were moving – and they most certainly were – there was money to be made.

By far, the strategy with the most potential in a volatile market comes thanks to the options market.

Remember, one of the key drivers of option prices is volatility. As price swings grow wider and wider… option prices soar.

But options aren’t the only strategy.

Thanks to the burgeoning ETF market, there are plenty of lower-risk ways to play rising volatility.

Here’s a list of just a few of them worth researching now – before fear is on the rise:

  • iPath S&P 500 VIX Short-Term Futures ETN (VXX)
  • VelocityShares 1X Long VStoxx Futures ETN (EVIX)
  • ProShares UltraShort 20+ Year Treasury ETF (TBT)
  • ProShares Short High Yield (SJB).

Think of it this way… in an ideal world, we wouldn’t need our toolbox. With nothing breaking or wearing out, our hammer and screwdrivers would sit in our garage and gather dust.

But stuff breaks. And even calm markets suddenly go south.

When they do, it’s vital to have another tool ready.

Your Liberty depends on it.

P.S. As we mentioned, Manward Trader subscribers locked in yet another triple-digit gain on Friday. Once again, this one took less than two weeks. There’s still time to get in on this week’s trade. Click here for everything you need to know.

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