Momentum Securities will be sharing their Stock Pick of the Week, each week on a Thursday.
This week’s pick: The Cboe Volatility Index (VIX)
About: According to Investopedia,The VIX, is a real-time market index representing the market’s expectations for volatility over the coming 30 days. Investors use the VIX to measure the level of risk, fear, or stress in the market when making investment decisions.
Stock pick for this week, is not a specific stock, but more so an ETF in the offshore space, that looks to take advantage of the recent volatility to be seen in markets. Now, hot on the heels of the back of the GameStop trade where we saw a David Goliath battle pairing up between retail traders or retail investors versus institutional houses. My pick for this week is the VIX. Now, the VIX itself is the Chicago Board of Options Exchange Volatility Index. It’s also known as the Fear Gauge. It measures the stock market’s expectations volatility over the next 30 days based on the S&P index’s options.
Now, the VIX hit a high of 37 this year back in, towards the latter end of January and an all time high of 89 back in October of 2008, which kind of points to the fact that it does work inversely to what the market does. Now, pre-pandemic levels of the VIX around about 15 and now sitting around about 20, which could point to more investors’ expectations of higher volatility in the shorter term or in coming weeks.
Now, not a lot on the macro-economic front this week, but we will start seeing GDP prints from the likes of the U.K, Japan itself and the Eurozone at the end of this week going into next week.
That, along with delayed vaccine rollouts globally, may cause some jitters or a little more volatility in the markets. And obviously this is looking to take advantage of it. Now, the reasons or the ways that we do this is through either iPath or ProShares ETFs trackers, that track the VIX itself. And just on that note, if you’re looking to take advantage of this, please chat your Momentum security portfolio manager to assist in purchasing or managing this position for you.
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