How to Trade VIX

How to Trade VIX Index

Investors and traders have several avenues available for trading the VIX index.

Futures traders can trade the index on the futures markets with a futures brokerage account, but this is typically the realm of professional traders and institutions.

Retail investors can trade VIX options in regular brokerage accounts or VIX ETNs which have proliferated in recent years.

TradingGods.net focuses on options and positions in VIX ETNs in our VIX Trader program.

There are many long and short VIX ETNs and also leveraged ETNs from which to choose and these are discussed in greater detail in the VIX Trader Program and other articles on this website.

VIX ETNs in general have some weaknesses in tracking the index and don't directly mirror the index but, nevertheless, offer opportunities to trade volatility. VIX options and options on VIX ETNs also don't directly track the index but offer a reasonable proxy and opportunities for knowledgeable options traders.

VIX has become a popular trading vehicle and presents a very liquid market offering investors multiple opportunities to participate in the volatility asset class.

VIX Trading Strategies:

 

--> VIX can be used as portfolio insurance. This strategy uses long VIX options or VIX ETF positions to protect a stock or ETF portfolio.

--> VIX can be used to speculate. Traders with nimble systems and effective risk management discipline can take advantage of the rapid moves in VIX, both up and down, away from and towards the mean, to seek profits in these fast moving markets.

--> VIX can be used for diversification. Like stocks, bonds or commodities, VIX investment products can add a new asset class to your portfolio to offer diversification and expanded investment opportunities.

--> VIX can be used for options trading. The options market for VIX and VIX ETNs is very liquid and actively traded and offers fast moving opportunities for various options strategies in weekly and monthly timeframes.

VIX Trading Vehicles:

--> VIX Futures Contracts: VIX Futures contracts are traded electronically on the CBOE Futures Exchange.

--> VIX Options: VIX Options started trading in 2006 and are listed on a regulated exchange and trade in similar fasion to regular options on stocks or ETFs.

--> VIX ETFs: VIX ETFs are offered by several major providers and offer the opportunity to trade long, short or leveraged positions related to the VIX Index.