Four ways to ride the volatility storm

Published Tue, Jan 20 201510:35 AM EST

Even the strategists who don't believe 2015 will spell the end of the bull market predict more of the up-down action that's marked the year so far. And with many of the traditional safe havens—like utilities—looking on the overvalued side, plays to ride out the storm are becoming increasingly rare. "Any buying we have seen on a day-to-day basis lately, or even intraday, has quickly been met with an equal or greater amount of selling," stated a Bespoke Investment Group report, summing up this year's action. "Given extremely low rates and a Treasury market that has gone parabolic, it's hard to find many assets outside of the equity realm to park in right now either." Even still, here are four volatility plays that strategists say are left. The PowerShares S & P 500 Low Volatility ETF tracks an index that contains the 100 steadiest members of the S & P 500. Stocks in the index such as Wal-Mart, Vornado Realty Trust and Procter & Gamble are weighted by the inverse of their volatility with the least volatile having the biggest influence. "For investors who want equity exposure, would prefer a smoother ride, and are willing to underperform in a strong market—low volatility strategies may offer a comfortable port in the storm," wrote Craig Lazzara, global head of index investment strategy for S & P Dow Jones Indices, in a blog post last week. The ETF is up almost 1 percent this year and 17 percent over the last 12 months, compared with a negative 2 percent return and 10 percent gain for the S & P 500 over the same periods, respectively. For the second play, CNBC.com ran a search using Kensho, a quantitative analysis tool used by hedge funds, looking at what performed among the iShares class of exchange-traded funds whenever the CBOE Volatility Index jumped more than 5 points in five days. The study canvassed the last decade. The No. 1 best performing asset was the iShares Barclays 20+ Year Treasury ETF , which had an average return of 2.65 percent and was positive 81 percent of the time during the more than 40 occasions when volatility spiked. The TLT is 5.8 percent higher in 2015 and 26 percent higher over the last 12 months. Read More Trader: Two ways to profit from Swiss franc surge The third play is a traditional safe haven that hasn't acted like one over the last few years: gold. Many strategists see a turning point this year for the metal with it rising this year as stock market volatility continues and the dollar surge, which has weighed on the price, eases. "The latest data indicate that: 1) the smart money is betting that gold is undervalued, 2) enough positive asset flows have come into the market to support a significant price advance, and 3) this advance is already underway," wrote John Kosar of Asbury Research, in a note to clients last week. The technical analyst forecasts an 8 percent rise in the SPDR Gold Shares ETF, which closely tracks the price of the metal, from here.The ETF is up 8 percent already in 2015. Kosar also suggests playing the gold companies, targeting an even bigger 16 percent gain in the Market Vectors Gold Miners ETF . The ETF counts Goldcorp and Barrick Gold among its top holdings. The last play is not for everyone as it involves buying options on the CBOE Volatility Index, a complicated prospect for some. It's paid off however. The VIX has jumped 9 percent to above 20 this year and it's up 70 percent over the last 12 months. "Due to its cost efficiency and the dynamic protection it offers, our preferred method is the purchase of VIX calls on a regular basis as a form of insurance," according to Larry McMillan of McMillan Analysis. "A general rule for a portfolio of $100,000 invested in the broad market is to purchase six front-month calls that are approximately 7.5 points out of the money to hedge all risk after a 10 percent drop in the market." Because of the construct of the VIX futures curve, McMillan sees getting the most bang for the buck through the purchase of call options on the iPath S & P 500 VIX ETN . Read More Chicago trader: Profit from 2015 volatility While the trades mentioned above should perform in a volatile-to-down environment, past results do not guarantee future performance, especially in this hyper-correlated market. So some strategists advise cash for the very best port in the storm at this stage. From Bespoke: "If you're long a basket of diversified stocks, chances are there are plenty of names you own that have gotten hit hard to start the year. When deciding what to do with them, simply ask yourself 'If I didn't own this stock already, would I buy it now to start a new position in it?' If you're looking to raise cash, sell the ones where the answer to that question is 'no.'" Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho. Disclaimer

Traders on the floor of the New York Stock Exchange.

Brendan McDermid | Reuters

Even the strategists who don't believe 2015 will spell the end of the bull market predict more of the up-down action that's marked the year so far.

And with many of the traditional safe havens—like utilities—looking on the overvalued side, plays to ride out the storm are becoming increasingly rare.

"Any buying we have seen on a day-to-day basis lately, or even intraday, has quickly been met with an equal or greater amount of selling," stated a Bespoke Investment Group report, summing up this year's action. "Given extremely low rates and a Treasury market that has gone parabolic, it's hard to find many assets outside of the equity realm to park in right now either."

Even still, here are four volatility plays that strategists say are left.