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Use VIX to Protect Your Portfolio: Strategist


The CBOE Volatility index (VIX), widely considered the best gauge of fear in the market, is currently trading below 23, well off its high near 80 last fall. How can investors use the VIX to benefit their portfolios? Paul Britton, CEO and founder of Capstone, shared his volatility strategy.

The Volatility Trade

“It makes absolutely all the sense in the world to protect your portfolio at the moment,” Britton told CNBC.

“No one buys this rally—it’s purely based upon technicals, people are underweight equities and you should use volatility and the options instruments to be able to lock in some of the gains that the bulk of the investors have made this year.”

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Britton expects the markets to go higher; but unlike in the past, investors will panic more to the upside and not the downside.

“I don’t think the VIX is going to come back down again because people are fearful for the upside,” he said. "Until the end of the year, people are too short equities and it makes all the sense to provide some insurance via" the VIX.

“At the beginning of the year, the investment clock resets and that will be a very interesting time for the volatility markets and the underlying markets as a whole and that’s when you should be looking to protect yourself,” Britton added.

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No immediate information was available for Britton or his firm.