Market Overview

Stocks Are Really Quiet Now: Here's How You Can Take Advantage

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Stocks Are Really Quiet Now: Here's How You Can Take Advantage

U.S. stocks have been extremely calm as of late with the Volatility Index trading near multidecade lows. Meanwhile, the S&P 500 index gained or lost more than 1 percent in a single trading session just four times this year in 2017. But that doesn't mean it will stay this way forever.

Stocks have been "melting higher with lower volatility," but that could change soon, Washington Crossing Advisors portfolio manager Chad Morganlander said during a recent CNBC "Trading Nation" segment.

Specifically, volatility is expected to pick up and coincide with the Federal Reserve's move to normalize monetary policy.

"A strategy for when the Fed is raising interest rates is to look at companies that are raising dividends — dividend growers, that is," he explained. "We did work on this going back 40 years, and it looks as if that slice of the equity market has outperformed the S&P with less volatility."

Bill Baruch, a senior market strategist with iiTrader, agrees with Morganlander and expects volatility to rise through at least August and September. But the current low volatility gives investors the opportunity to protect their portfolio through the options market which is full of cheap premiums.

Specifically, $50,000 worth of S&P 500 exposure could be protected for around $500, he said. But on the other hand, investors are discouraged from taking part in option selling strategies to collect a premium because there simply isn't "a lot to gain."

Related Links:

'50 Cent' Trader Returns, Loading Up New Hedge Bets Against A Selloff

Dennis Gartman On Why Volatility Isn't A Measure Of Bullishness Or Bearishness

Posted-In: Bill Baruch Chad Morganlander CNBC iiTrader optionsMarkets Media Trading Ideas Best of Benzinga

 

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