Trade War: Three Top Ways to Trade Market Volatility

On September 1, 2019, the U.S. will be “putting a small additional tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our country,” tweeted President Donald Trump. “We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one,” he added.

That followed another round of failed talks between China and the U.S.

China then retaliated, halting all imports of U.S. agricultural products.

“The leverage that China has is its large agricultural purchases,” Darin Friedrichs, a senior analyst at INTL FC Stone’s Asia commodities division, as quoted by Bloomberg. “This does affect U.S. farmers and the rural U.S. voting base that’s normally in support of Donald Trump. If they hit back before the election, that’s the obvious way to retaliate.”

While things seem to be cooling down just a bit, here are the top 3 ways to trade volatility.

Four of the Best Ways to Hedge Volatility

As things only began to get worse, investors were piling into safe bets including:

ProShares Ultra VIX Short-Term Futures ETF (UVXY)

As volatility ticks higher with the trade war, ETFs such as the UVXY could run even higher from a current low of $30 a share. . The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index.

VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

The TVIX is another great way to trade elevated volatility. This ETF tracks an index of futures contracts on the S&P 500 VIX Short-Term Futures Index. As volatility ticks higher, the TVIX ticks higher.

iPath S&P 500 VIX Short-Term Futures (VXX)

As volatility returns to the markets, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return. In simple terms, as volatility shoots higher, so does the VXX.

By: Ian Cooper of Wellington & Co. Hedge Fund Research

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