For college basketball fans, March Madness is later this month. But for investors in many parts of the stock market, March “badness” is already the headline-maker.
I’m skipping over the daily chart of the CBOE Volatility Index ($VIX) since it can be very skittish. Here’s the weekly. Do you see what I see? It hit 30 for the first time since last April. But if that was the peak, unlike the last two times it carried that level, investors will have won a nice game of dodgeball.
It means that the tranquil market has officially shattered. Now, that doesn’t mean the S&P 500 Index ($SPX), on which the VIX is based, is destined to crater any time soon. It implies that the market is set up for a much wider range of outcomes than it was a few weeks ago. So, this sudden spike is more than just a statistical outlier. It is a clear signal that the fear gauge has moved from a state of complacency into a high-risk zone.
Historically, a VIX reading above 30 indicates heightened uncertainty and extreme investor fear. In this environment, the market is no longer pricing in smooth sailing but is instead bracing for potential supply-chain disruptions and geopolitical flashpoints. While these spikes are often short-lived and can present contrarian buying opportunities for long-term investors, the current momentum suggests that the path forward will be defined by continued whiplash.
For those looking to capitalize on this movement, the exchange-traded fund (ETF) market offers two polar-opposite tools: the ProShares Ultra VIX Short-Term Futures ETF (UVXY) and the ProShares Short VIX Short-Term Futures ETF (SVXY).
UVXY is a weapon for those who believe the chaos is just beginning. By providing 1.5x daily leveraged exposure to short-term VIX futures, UVXY is designed to deliver amplified returns during sudden market panics. When the S&P 500 falls, VIX typically rises, and so does UVXY. On Friday alone, as the VIX neared the 30 mark, UVXY surged by more than 10% as traders scrambled for downside protection.
However, this is a highly tactical instrument. Its leveraged nature and the costs associated with rolling futures contracts mean it can lose value rapidly if the market stabilizes even slightly. It is intended for short-term bursts of hedging rather than a long-term hold.
