The U.S. stock markets continue to hold up and even push a tad higher this week, ahead of tomorrow’s Fed interest rate decision. Unfortunately, because of this rally, you were stopped out of your iPath S&P 500 VIX Short Term Futures ETN (VXX) position yesterday, but at a very modest loss.
If you are not out of VXX for whatever reason, please exit your shares as soon as possible.
No matter what the Fed decides to do tomorrow, to raise rates or not, I think you can count on one thing – higher volatility in the markets.
It’s unfortunate you were stopped out of VXX, but it may also be a blessing in disguise, freeing you up to put capital in a potentially more profitable volatility trade.
That’s why TODAY, I recommend that you purchase shares in ProShares Ultra VIX Short-Term Futures ETF, symbol UVXY.
Note that you are not trading futures when you buy this ETF. It is an ETF that mimics the volatility of the S&P 500 VIX Short-Term Futures Index. Unlike VXX, this particular ETF is a double-leveraged ETF.
If, for instance, volatility in the S&P 500 or Dow increases by 10%, this ETF should increase in value by roughly twice that amount.
Meanwhile, continue holding your bearish stock position on DXD, with a protective stop in place on a good-till-cancelled basis. Also hold UNG and UGLD, with your stops in place.
Here are the details for the recommended trade. Note that the protective stop is wider than I would normally use. That’s due to the volatility expected in tomorrow’s trade. I will tighten that stop up as soon as possible.
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For all subscribers, for every $25,000 you are trading: BUY 50 shares of ProShares Ultra VIX Short-Term Futures ETF, symbol UVXY, at the market. Place a good-till-cancelled protective sell stop at $36.74. |
Stay tuned and best wishes,
Larry
