Almost a sure way to make money at panic

The stock markets are crashing and everyone is running away, which makes a moonshot for VIX, the Volatility Index and so-called the market's "Fear Gauge". VIX shot up 20% today and briefly touched 30, a level not seen in almost 3 years. So can you make money when the market is in the panic mood? Definitely yes! As you can see below, VIX has rarely gone over 30 (the higher it goes, usually the lower the market goes, indicating investors are more nervous and dumping stocks). Since 2008 when VIX went all the way up to over 80 during the peak of the financial crisis, VIX has only been over 30 two times. It is even rarely above 20 in the past 2 years, a clear very complacent market! You may notice, regardless how high VIX goes, it always comes down when the market calms down from panic. There is no such thing that the market will be at the panic state all the time. So you can bet safely that sooner or later, the market will calm down again and VIX will decline as well. I bet VIX won't stay above 20 for long and may come below that pretty soon in a few weeks or even sooner.

 

So how can you trade for a declining VIX? Buy XIV, an inverse ETF for VIX. XIV will go up along with VIX coming down. While I expect VIX may start to decline pretty soon, you will still not likely lose money from XIV even if I'm wrong and VIX stays high or even continues to go up for a while. Why? As I said, it is just a matter of time when VIX will come down. As long as you can hold XIV, you will eventually make money. In investment, I don't want to say 100% for anything, but this one is close to a sure thing to make money, if you have enough patience and nerve.

 

Below is just what occurred today for XIV when it was bought at the time VIX was close to 30. Within a few hours when the market closed, XIV was already up by 10%. This is how fast it can move. If VIX is still above 25 in the next few days, buying XIV is a good trade.