Investing in Fear (VXX, VXZ)

Two new ETNs that offer exposure to volatility could provide an interesting tool for asset allocators who want insurance against a sudden market crash.

In the article Volatility indexes offer hedge for investors, Fortune reporter Yuval Rosenberg writes that the iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) and iPath S&P 500 VIX Mid-Term Futures ETN (NYSE: VXZ) enable investors to buy (or sell) the implied volatility of the S&P 500.

Rosenberg cautions investors to consider the risks and drawbacks involved before buying the ETNs. For example, owning the VIX can provide some insurance in case of a steep market drop, but it won’t appreciably help a portfolio in other times.

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