Imagine if there was an index that directly impacted the price
of every stock and not the other way around. It measured, in a
simple 0-10 scale of whether stocks as a whole were expensive or
On days when it was high (say, above 5), you would want to
sell stocks. When it was lower, you would want to buy stocks.
Making money in stocks would be easy. You would know, based on
absolute raw numbers if stocks were priced expensively or
Well, right now, there's something similar that's happening in
the world of options.
There's an index that directly impacts the price of ALL
options. You might have heard it called "The Fear Index," which
is something of a misnomer.
Otherwise known as the Volatility Index or "VIX", it's a
simple index that measures the market's expected movement in the
S&P 500 over the next 30 days.
Yes, the VIX spikes when stocks fall - but it also spikes when
stocks rise. In some cases, it might rise if the market is flat.
The market can expect any number of scenarios, but it is
important to remember that the VIX acts as a multiplier for the
price of options.
In effect, the VIX is a scale that tells when options are
priced high or low. As income investors, that's all we care
Because today, the price the market is willing to pay for
options is higher than it has been in a year…
Why? It probably has to do with the government shutdown…but I
honestly don't care about the reason.
Let me explain. Below is a chart of the volatility index, also
known as the VIX. There's no doubt, that if you want to get the
real pulse of the market, you can look at the VIX.
We've all seen it running across the ticker screen on CNBC or
Bloomberg, yet many of us have no idea what it is, or more
importantly, how to use it to our advantage.
Simply stated, the VIX monitors investor fear. And it rises
when investors have concerns about the market.
As you can see below, the VIX is currently trading near 19.
That's nearly a 40% jump in just three weeks.
When the VIX is low, options are considered cheap. When the
VIX is high, options are considered expensive. As you can see
from the chart we are nearing new highs and these periods of high
volatility typically don't last long.
So, now is the ideal time to protect your investments by
selling a few options, namely credit spreads.
This is exactly what I do in my
service…I sell options to speculators. And when options prices
are hitting new highs and can make substantially more while
increasing my odds on each and every investment.
So now it's time to collect more money (with less risk) from
very simple investments like the S&P 500, the Russell 2000
Simply put, when investors are "afraid" they're willing to pay
a lot more for options. And we can use this increased fear to
take less risk and collect more income - that's the holy grail of
To take advantage of this spike in the VIX, I'm hosting a
free, live webinar event.
Join me, next Wednesday at 12 p.m. and I'll show you exactly
how to profit from market fear.
Click here to reserve your seat now.