October is notoriously a shaky month for the stock market.
A lot of people will say July and August are the worst, but from my experience October is the most volatile.
But with volatility comes profits…
We’ve only got a week left of October, but if the market does get spooked, YOU can take a handful of profits into November.
On paper, September was a rough month in the market.
In reality, it was a healthy, predictable down-stepping correction that could’ve been seen from a mile away.
October came around and has so far seen over a 4% increase in the S&P 500.
That’s not like October.
October is usually a month that gets spooked… and it usually doesn’t wait until Halloween to do so.
But this year looks different.
Now, I’m not saying there’ll definitely be a drop this week. And I’m not saying to pull out of any positions you’re currently in.
But what I am saying is that if there is a spook, we can make a handful of profits from it.
When people ask me what they should do when the market’s going down, I tell them about two options…
You can pull all your money out and sit on it (safer than losing it).
OR… you can use one of the few ways to make a quick killing as it goes down.
One of my favorite (and quickest) ways to make profits when the market is going down is by using something called the Volatility Index ($VIX).
The volatility index measures the amount of fear and greed in the market. Or more precisely, the amount of fear and complacency.
The $VIX is measured out of 100. I’ve never seen it get to 100, but that would mean total fear.
I’ve also never seen it get to 0, but that would mean total complacency.
These days, it hovers around 15 when people are complacent and the market is happy.
As I write, it’s sitting at 15.37.
Pretty complacent in my book.
To give you an example of how it reacts to fear, in the depths of the initial Covid shock in March 2020, it spiked from 15 to 85 in just a couple of weeks.
Now, when it spikes (meaning there’s fear), there’s money to be made.
We don’t need it to jump all the way to 85. You can make good money if it jumps up above 30.
Since the $VIX isn’t directly tradable like a stock is, you would buy VIXY. It’s an ETF (exchange traded fund) that tracks the movement of the $VIX.
Now, it doesn’t exactly align numerically, but when $VIX spikes, VIXY spikes.
So, my plan as soon as I see the market get spooked, is to buy shares of VIXY and get out as the $VIX starts to float down again.
This will leave us with a handful of cash, while everyone else suffers whatever minor dip the market could see this week.
So, keep your eyes on the market, and if we see any inkling of instability this week, then jump on VIXY.
