Question: What is an efficient way to go long vol and hedge your equity portfolio against a down move? Answer: Put on a VTX Vertical call spread

摘要

Here is an interesting speculative trade if you think stock market volatility is too low, or to put on a downside hedge against your stock portfolio, albeit indirectly. And one can do this by using options on the CBOE Volatility Index (VIX), namely a vertical VIX call spread. The VIX provides a measurement of the implied volatility in broad U.S. equity market over the next 30 days. Remember that there are two sorts of volatility: Historical and implied. Historical is just that, looking backwards. Whereas implied volatility is what the market in its wisdom of supply and demand thinks the volatility will be.