New Trade for September 16th, 2020

Futures are green this morning ahead of the FOMC announcement.  This afternoon the Federal Open Market Committee will provide its quarterly update on its estimates for GDP, unemployment and inflation.  

Investors widely expect the central bank to maintain a downbeat stance on the economy.  This will be the first Fed decision since the policy shift toward greater tolerance of inflation, so the announcement could shed some light on what effects have developed from that shift.  This will also be the final Fed decision before the election, which is now just 49 days away.  

Volatility could rise as we finish out the week.  Here are a couple of the best ways to play heightened volatility…

ProShares VIX Short-Term Futures ETF (VIXY)

  • 1-Year Trailing Total Return: 137.0%
  • Expense Ratio: 0.87%
  • 3-Month Average Daily Volume: 5.9 M
  • Assets Under Management: $426.7 M
  • Inception Date: January 3, 2011
  • Issuer: ProShares

iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) –  

  • 1-Year Trailing Total Return: 139.2%
  • Expense Ratio: 0.89%
  • 3-Month Average Daily Volume: 59.6 M
  • Assets Under Management: $2.2 B
  • Inception Date: January 17, 2018
  • Issuer: Barclays Capital

Both VIXY and VXX track an index comprised of short-term VIX futures contracts.  

Volatility plays can bring huge profits, fast, which also means higher risk.  We only recommend investing in the volatility index if you are an active investor who can monitor the index closely.