Tuesday, 14 September 2021 18:45

How to Stay Hedged in Times of Volatility

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(New York)

A successful 8-month streak has put the market well above expectations, and there are reasons to still be optimistic, but the number of protection plays is growing on Walls Street. Whether it is a slowing economy, rising inflation, spreading delta variant, or tapering tantrum there are lots of reasons to stay protected which is why over $5 billion in inflows are headed to volatility-based protections. Funds like the Simplify Interest Rate Hedge ETF (PFIX) offer a direct hedge against a future of the interest rate market by placing a call on Treasury derivatives. A wider hedge against the ETF like the Simplify Volatility Premierm ETF (SVOL) which can generate a yield from swings in the Cboe Volatility Index. This hedge is less specific than the PFIX but it gives investors a bigger safety net in any of the scenarios above or unforeseen risks in the economy.

FINSUM: Honestly leave the bond hedges to the past as there is no return. Instead, SVOL and PFIX are hedges that will likely clip the Treasury return anyway and provide more relief in case equities go upside down.

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