Ways To Trade Stock Market Volatility

An increasingly popular way to make money in the stock market is to trade stock market volatility.  Understanding how to trade stock market volatility will not only provides traders new potentially profitable trading opportunities, but can also provide protection against unexpected events that cause stock market volatility and sell offs.

There are two ways to trade stock market volatility:  buying volatility call and put options and volatility exchange traded funds (ETFs).  Volatility options are options that derive their value from the price and movement of the Chicago Board Options Exchange (CBOE) Market Volatility Index (Symbol:  VIX).  Volatility ETFs derive their value from the price and movement of volatility options pegged to the movement of the VIX.

For sophisticated traders who have options trading accounts and understand options trading (see:  Option Trading Basics), buying volatility call and put options may be the best way to trade stock market volatility.  This is because volatility options that derive their value from the price and movement the VIX are the purest way to play market volatility.  A trader can profit from the actual price movement in the VIX by buying volatility VIX call and put options without having exposure to the other financial instruments that comprise volatility ETFs.

Average individual investors can trade stock market volatility, without using options or an options trading account, by buying either long or short oriented volatility ETFs.  Long oriented volatility ETFs can be brought while volatility is low to profit from volatility spikes.  Short oriented volatility ETFs can be brought while volatility is high to profit from volatility selloffs.

Two volatility ETFs that are available for trading volatility on both the long and short side are:  Velocity Shares Daily 2x VIX Short Term (Symbol:  TVIX) for trading volatility on the long side and ProShares Short VIX Short Term (Symbol:  SVXY) for trading volatility on the short side.  Volatility ETFs are a relatively safe way to play volatility in the stock market; however, during bull markets when volatility is low, long oriented volatility ETFs can lose value over time due to option price decay, which should be kept in mind by traders looking to protect their trading capital.

Understanding How To Trade Stock Market Volatility

Before starting to trade stock market volatility, it is important for traders to understand what volatility options and volatility ETFs are based upon, which is the CBOE Market Volatility Index (VIX).  Volatility options and volatility ETFs generally track the movement of the VIX in either a positive or negative direction, based on their long or short orientation.  The VIX is defined as a measure of implied market volatility over the upcoming thirty (30) calendar days.  In plain English, the VIX reflects how much options traders are paying for options contracts to protect their long positions from market downturns.

To effectively trade stock market volatility, it is important to understand that timing of the volatility trade is paramount.  When the VIX is trading below 20, it is time to consider buying long orientated volatility options and volatility ETFs, for a potential future spike in the VIX and increase in the associated long volatility options and volatility ETFs.  When the VIX has spiked higher during a stock market selloff or panic, and is trading above 40, it is time to consider buying short orientated volatility options and volatility ETFs, for a potential future drop in the VIX and increase in the value of short oriented volatility options and volatility ETFs.

The stock market volatility trade should be used sparingly and in moderation for times when the VIX reaches oversold and overbought levels.  It should be noted that the VIX can stay at oversold and overbought for long periods of time; therefore, it is recommended to trade stock market volatility with a great amount of patience.

Stay up to date on How To Trade Stock Market Volatility by getting on our FREE eMail list!

Making Easy Money In The Stock Market Trading Volatility

Every stock market trader tries to find a way to make easy money in the stock market without exposing their trading account to excessive risk.  There is an endless stream of stock market advice gurus and trading systems with the goal of making easy money in the stock market.  The emergence of volatility exchange traded funds (ETFs) in recent years presents a way to make easy money in the stock market and a means of hedging against stock market sell offs.

Volatility ETFs derive their value from futures and options contracts that comprise the Chicago Board Options Exchange (CBOE) Market Volatility Index (Symbol:  VIX), and generally track the movement of the VIX in either a positive or negative direction based on their orientation, either long or short.  The VIX is a measure of implied market volatility over the upcoming thirty (30) calendar days.  The VIX changes price based upon how much options traders are willing to pay for options contracts to protect their long positions from market downturns.  An options trading account is not necessary to trade volatility ETFs; they can be traded via a regular brokerage account.

Trading volatility is a matter of timing, as timing the trade correctly can be the difference between a loss and a profit.  In a nutshell, when the VIX falls below 20 and stock market sentiment is positive, it is time to consider buying volatility ETFs.  Then a trader must wait for the market to experience turmoil and a selloff, which sends the volatility ETFs up in price.  Traders can then sell volatility ETFs to make easy money in the stock market from stock market volatility.

Volatility ETFs can also be traded on the short side, by selling borrowed volatility ETFs shares short when volatility ETF prices are high, then purchase the borrowed volatility ETFs shares at a lower price, once the stock market selloff that caused the volatility ETFs price spike reverses course as the stock market goes from a bear to a bull market.

Two examples of volatility ETFs that are available for trading are Velocity Shares Daily 2x VIX Short Term (Symbol:  TVIX) for trading volatility ETF on the long side and ProShares Short VIX Short Term (Symbol:  SVXY) for trading volatility ETF on the short side.

Making Easy Money In The Stock Market Trading Volatility – Things to Consider

Trading volatility ETFs is a relatively simple way of making easy money in the stock market; however, trading volatility ETFs does not work well during sustained bull market rallies in the stock market.  In recent years, when the VIX traded in the 15 to 20 range, it was a buy signal to buy volatility EFTs.  However, during sustained bull market rallies in the past, the VIX has traded in the low teens for a number of years, offering few chances to make money price spikes in volatility ETFs.  Committing too much money to buying and holding volatility ETFs during sustained bull market rallies could divert money that could be deployed elsewhere in the stock market to make money on stocks and other financial instruments that are rallying.  Volatility ETFs should be utilized sparingly, as way to diversify investments and hedge against market downturns.

With the incredible stock market volatility in recent years, volatility ETFs have provided ample opportunities for making easy money in the stock market.  While nobody knows when the next steep stock market selloff will occur and send volatility ETFs soaring higher, holding volatility ETFs in a brokerage account is a way to make easy money in the stock market from stock market volatility.

Stay up to date on Easy Money In The Stock Market by getting on our FREE eMail list!

What the Top Small Caps Can Do For You 

The top small capscan do two things for your portfolio. They offer you some diversity in your investments. They also allow you to become part of a rising enterprise.

You probably have a number of large cap stocks or some other conservative investment in your stock portfolio. These investments are good but you should always offset such investments with financial instruments from other sectors of the market. It is particularly useful to maintain a certain number of investments in stocks issued by smaller companies with lower market capitalizations.

The top small caps combine this lesser size with greater potential. Most large cap companies had to start out small. They worked their way up from small cap territory to the successful station that they inhabit today. Just imagine if you had invested in a small cap stock worth five dollars twenty years ago. Now the stock might be worth several hundred dollars per share. You would have received incredible returns over the years.

How to Identify the Top Small Caps 

The top small caps are much like other small cap stocks at first glance. They usually have somewhere between one and five billion dollars in market capitalization. Their stock prices will vary but they are not less than five dollars. You should not confuse the top small cap stocks with penny stocks. Small caps may be risky investments but they are not nearly as dubious as many penny stocks. All small caps are traded on the major stock exchanges and meet SEC requirements.

Take a closer look at these companies to find the top small caps. Investigate their fundamentals. If they are increasing earnings every year then they are showing signs that they may be the top small caps on the market.

Find more information on top small caps on the FREE email list:

Why Top Small Cap Stocks Are a Good Choice

Investing in the top small cap stocks accomplishes two important tasks for you. This type of investment healthily diversifies your portfolio. It also gives you a chance to get involved with a stock that has a possibly bright future.

Everyone knows that you need to keep a diverse collection of investments in a portfolio. Too many large cap stocks will leave you with a boringly conservative set of investments that grudgingly makes returns. Too many small cap stocks would result in a high amount of risk and the potential for big losses. You need the right mixture of stocks in order to protect yourself from losses with large cap stocks while you maintain the opportunity of significant gains with a top small cap stocks.

That is the real attraction the top small cap stocks. Since the price of each share is generally low, you can buy a lot of shares. If you have only $10,000 to invest but you have to choose between a large cap stock and a top small cap stock, the difference in buying power is stark. You can buy 2,000 shares of a five dollar stock with that money. You can only buy 100 shares of a $100 stock. When these stocks experience similar upticks in price, you will earn a lot more with the top small cap stock.

Some of the Top Small Cap Stocks

•             Silver Standard Res

•             Myriad Genetics

•             Westlake Chemical Corp

•             Graftech Intl

•             Lincoln Electric

•             Allied Nevada Gold Corp

•             Nu Skin Enterprises Inc

•             Pan American Silver

•             Teradyne Inc

•             Reliance Steel & Aluminum

The stocks listed above are some of the top small cap stocks at present. They represent various sectors of the market, including precious metals, biotech and energy as well as some from more traditional sectors.. Look each of them up to find out more information and decide if you want to invest in these top small cap stocks.

What Is a Micro Cap Fund

It seems that the micro cap fund has become more popular than ever. While it was almost unheard of fifteen or twenty years ago, an increasing number of investors have been raking in huge returns with micro cap investments. While micro caps may be stepping into the limelight for the first time, however, they have been around as long as other types of exchange traded funds (ETF).

If you are hoping to claim your share of the micro cap profits, it is important that you first understand what micro caps are and how they work. Essentially, micro caps are regular ETF’s. They are traded on stock exchanges. They include a variety of types of funds such as bonds, currencies and commodities. What makes a micro cap different, however, is the size of the company it represents. Micro cap companies hold between $50 million and $250 million market capitalization. Because they have so little market capitalization, they do not usually meet the listing requirements for standard stock exchanges. Because of this, a micro cap fund is sold over the counter on the OTCBB or the Pink Sheets.

Micro Cap Fund: A Game of Balance

There are a few things you can do in order to get the most out of your micro cap fund investment. It is important that you thoroughly research the fund before you buy any shares. While micro caps can grow exponentially in value overnight, they can devalue just as quickly. The only way to ensure that you make a good decision is to make an informed decision.

It is also a good idea to buy in quantity. Although a micro cap’s low cost is one of its most attractive features, you will have to pay brokerage fees each time you buy more shares. Each investment should be large enough to justify the fees you are paying. In the end, however, the most important thing is to trust your own judgment. If you believe that you are investing in the right micro cap fund, you may soon see the returns of your dreams.

Find more information on micro cap fund on the FREE email list:

What Are Small Cap Stocks to an Average Investors?

“What Are Small Cap Stocks?” is a question the beginning investor often poses to his or her stockbroker.  Trying to figure out all the different types of stocks can be a daunting task.  Many investors specialize in a specific area and focus all of the research there.  A savvy investor can often boost his or her own portfolio by diversifying his or her assets; taking advantage of small cap stocks is one way to increase the return on investment of the portfolio.

What Are Big Cap Stocks and What Are Small Cap Stocks?

The definition of different sizes of stocks is based off market capitalization; this is what “cap” is short for.  The market capitalization of a stock is what the market feels the company’s general worth is.  The amount that determines what are small cap stocks has changed over the years; currently the category low and high figure is approximately $300 million to $2 billion.  While that value seems rather high, the values for determining a big cap stock are $10 billion to $200 billion.  Learning what are small cap stocks will help determine level of risk.  The advantage of a small cap stock is that it has a decent chance to have a profits explosion and double or triple its worth.

The larger cap stocks do not have high percentage growth most of the time; they are often categorized as slow, but reliable growth. Slow, reliable growth is the definition of a low risk investment.  The low risk investments are used to hedge the high risk investments; these low risks keep a portfolio afloat when a high risk venture turns bad.  Deciding what are small cap stocks to invest in can be tough, but the profit potential is too good to pass up.

Understanding Small Caps ETF

Small caps ETF are special types of investment for more than one reason. ETF stands for exchange traded fund. These index investments are fairly recent opportunities for most investors. They were created in the 1990s. Small caps ETF are a type of ETF that consists of selections of companies with low market capitalizations.

An exchange-traded fund is similar to a mutual fund. It is essentially an index of stocks, commodities and bonds. When you buy a share of such a fund, you purchase a little of all the financial instruments included in its basket of investments. The value of your shares will track the performance of all these investments simultaneously.

Small caps ETF are funds that consist specifically of assortments of small cap stocks. Small cap stocks are issued by companies with market capitalizations of less than five billion dollars. AN ETF spreads out investment in these smaller companies in order to minimize exposure to the risk presented by smaller companies. These funds also offer investors the possibility of considerable gains that successful small cap stocks can make.

Investors in small caps ETF are usually trying to diversify their conservative portfolio with investments that have more potential for growth. Small cap stocks can always grow into large cap stocks but large cap and mega cap stocks are nearing the limit of their growth. A small caps ETF gives investors access to that kind of possible growth without leaving them vulnerable to the kinds of failures that are more common among small cap companies than among large caps.

Top Small Caps ETF

•             First Trust Small Cap Cor Alpha DEX Fund

•             India Small Cap ETF

•             Market Vectors Brazil Small-Cap

•             Powershares Dynamic Small Growth Portfolio Fund

•             Schwab International Small Cap-Equity

The above list shows just a handful of the hundreds of small caps ETF. They represent smaller companies from just about every sector of the market. Investigate each further before you make an investment decision about small caps ETF.

Agricultural Commodities ETF: The Seeds of a Good Investment

As good farmers know it is time to plant seeds for the coming year, good investors know it is time to buy shares of agricultural commodities ETF. After all, the two things are inextricably connected. Summer is the high season for the agricultural industry, but it is actually in late winter and early spring when everything starts. The seeds are planted, the fields are plowed and farmers lay the groundwork for another year’s successful crops. This is also the perfect time to lay groundwork for successful investment in the agriculture industry. Commodities such as corn, wheat and soy will not be on most investors’ radar for another few months and share prices are still low. Although it can be difficult to predict the weather or to judge how well the crops will grow, you can cut the risk of a bad investment by buying agricultural commodities ETF low now. If the crops fail, you will not lose much. If the crops thrive, you could earn enormous returns.

Agricultural Commodities ETF: A Booming Industry

Although there is risk associated with every investment, agricultural commodities ETF is a relatively safe investment. After all, the products of agriculture are used in almost every industry. Corn, soy and wheat can be found in almost every product sold on the supermarket shelves. Cotton is used to make a wide range of low and high-end clothing. Special processing plants are being used to turn the products of agriculture into everything from medicine to fuel to biodegradable plastic. Natural products are in and most of them come from agricultural commodities. Agriculture is a booming business and smart investors are jumping in early to take advantage of the boom. Investing in agricultural commodities ETF may be your key to success.

Find more information on agricultural commodities etf on the FREE email list:

A Micro Cap ETF can be Lucrative and Equally Risky

A micro cap ETF has some major draw factor if the investor is willing to do the research and accept the risks. Micro capitalization trading firms will typically index small, unknown companies and accordingly they have a high tendency to fail, file for bankruptcy or delist. This does not mean they will not reward a savvy investor with handsome returns. The common characteristics of micro cap ETFs are high risk, the ability to stay liquid and extreme volatility.

 The Nature of a Micro Cap ETF

The risk associated with small companies makes it unwise to own a too large or a controlling interest in them. For this reason, ETFs typically spread their investments over hundreds of companies in order to keep their assets small in the event they need to sell their holdings. Additionally, too much money from ETFs can cause a price disruption that would not occur in the larger cap indexes. The down side to spreading their assets thinly across many companies is a minimal gain from positively producing firms.

The very nature of the micro cap ETF class implies a constantly shifting security allocation. Companies regularly outgrow their status and move to the next class, while many more disappear altogether due to bankruptcy and delisting. This make for unsure investing while hinting at a promise of giant returns.

Micro cap equities can be extremely volatile, changing dramatically on a minute-by-minute basis. This is good news to the investor seeing double digit percentage growth in a matter of hours; however, the opposite scenario is just as possible, resulting in a crippling effect to an investment.

Every big risk should come with the potential of a big reward. While many investors turn to the micro cap ETF as a means of diversifying their portfolio and possibly generating a significant return for minimal capital, they put the bulk of their investments in medium or large cap ETFs for the security.

Metal ETF: Not Just Gold

When it comes to the phrase ”metal ETF,” investors have a tendency to focus their attention in two directions: Gold and silver. That means the most popular metal ETF on the market is the SPDR Gold Shares (NYSE: GLD). GLD isn’t just the largest and most heavily traded metal ETF, is also the second-largest ETF in the world of ANY kind.

Next, the metal ETF conversation will drift to GLD rivals such as the iShares Gold Trust (NYSE: IAU) or over to the major silver ETFs, the iShares Silver Trust (NYSE: SLV) and the ETFS Physical Silver Shares (NYSE: SIVR). And there would end the metal ETF discussion for investors not willing to look beyond the usual suspects. However, there’s much more to the metal ETF game than just gold and silver.

Metal ETFs: Beyond The Usual Suspects

Alright, so you know about the metal ETF that will get you involved with gold and you have a fund in mind for silver, but what about the other metals? If you’ve been wondering if there’s a metal ETF that offers exposure to other precious metals, you’re in luck thanks to the folks at ETF Securities. That firm offers the only ETFs backed by physical holdings of platinum and palladium, the ETFS Physical Platinum Shares (NYSE: PPLT) and the ETFS Physical Palladium Shares (NYSE: PALL).

If you demand more from your metal ETF, consider a basket fund. The ETFS Physical Precious Metals Basket Shares (NYSE: GLTR) offers exposure to gold, silver, platinum and palladium. The ETFS Physical White Metals Basket Shares (NYSE: WITE) is a metal ETF focusing on just silver, platinum and palladium.

Metal ETF: Not Just Precious Metals

The metal ETF universe isn’t limited to precious metals. There is a range of exchange-traded notes (ETNs) on the market whereby investors can trade industrial metals such as aluminum, copper, lead, nickel and zinc. Many of these funds are thinly traded, so they may not be suitable for some investors. Check with your financial advisor and do your own homework before deciding which metal ETF belongs in your portfolio.

Find more information on metal ETF of the FREE email list: