World War III: How Investors are Preparing for Volatility

There’s plenty of fear in the market.

Gold just spiked to a seven-year high.  Oil hit $70. Investors are panicking.

All as tensions between Iran and the U.S. just begin to boil over.  

In the days following a U.S. strike that killed Iranian General Qassem Soleimani, the U.S. is already detecting a heightened state of alert by Iran’s missile forces.  All as Iran’s supreme leader vows to deliver “severe revenge” to those responsible.

Iran also threatened to attack the White House, and put and $80 million bounty of Trump’s head.  However, President Trump isn’t taking threats lightly. In fact, he warns the U.S. will strike back if Iran attacks any U.S. interests following the killing of the general, adding, “If they do anything, there will be major retaliation,” as quoted by the AFP.

At the same time, Iran is abandoning all restrictions on uranium enrichment.

That means “Tehran could install new centrifuges—machines that produce enriched uranium—and further ramp up the purity of the fuel it produces closer to weapons-grade material,” says The Wall Street Journal.  “That would allow Iran to reduce to less than six months the time needed to amass enough nuclear fuel for one bomb, once it reinstalls a sufficient number of its centrifuges, a process expected to take months.”

While there are fears Iran could move to choke oil supply at the Strait of Hormuz, some analysts aren’t so sure that’ll happen.  Ed Yardeni, president and chief investment strategist at Yardeni Research, as quoted by CNBC, notes, “We don’t believe that Iran will disrupt oil supplies significantly now that the US has demonstrated a willingness to use lethal force to deter Iran’s mischief-making in the Middle East.”

With all of this uncertainty, volatility could spike – along with VIX-based stocks including:

ProShares Ultra VIX Short-Term Futures ETF (UVXY)

The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. 

VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

The TVIX is another great way to trade elevated volatility.  This ETF  tracks an index of futures contracts on the S&P 500VIX Short-Term Futures Index. 

iPath S&P 500 VIX Short-Term Futures (VXX)

As volatility returns to the markets, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return.