Most traders focus on stocks, but sometimes, trading volatility makes more sense. The S&P 500 (SPY) moves up and down, but the real action happens in the VIX, which spikes when markets get turbulent.
If you know when to shift from stocks to volatility, you can take advantage of market swings instead of getting caught on the wrong side of them.
Why Volatility Can Be a Better Play
Stocks grind higher over time, but they don’t move in a straight line. When markets sell off, the VIX surges because traders pile into options for protection. That’s why the VIX is often called the market’s “fear gauge” — it measures how much traders are willing to pay for insurance.
Let’s say the S&P 500 is dropping fast. If you own SPY, you’re stuck taking the hit. But if you’re trading the VIX — or VIX-based products like VXX or UVXY — you could be profiting from that surge in fear.
This also works the other way.
When markets calm down, the VIX falls, and volatility-based trades can lose value quickly. That’s why timing is critical. You don’t want to be late to the trade, chasing the VIX after it’s already spiked.
When to Switch From Stocks to Volatility
If stocks are grinding higher with low volatility, there’s no reason to bet on a VIX spike. But if you see signs of turbulence — like sudden sell-offs, rising put option volume, or key technical breakdowns — shifting to volatility trades can be a smart move.
One way to track this is by watching VIX levels relative to SPY. If the VIX is unusually low while markets look shaky, it might be a sign that a volatility spike is coming. On the flip side, if the VIX is already elevated, the easy money has likely been made.
Trading volatility isn’t for everyone. It moves fast, and the wrong timing can be costly. But if you know when to step out of stocks and into the VIX, you can capitalize on market swings instead of being a victim of them.
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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