Volatility Strategies Can Result in Big Gains and Limit Losses

Paul Sullivan authored an article in The New York Times discussing how investors profit off of volatility, limit losses and make returns more consistent. Hedge funds and money managers have used volatility as a source of gains and to limit losses for decades, one quoted even considers it its own asset class. The playing field has now been substantially leveled and individual investors are now becoming more comfortable with using volatility instruments in their portfolios. Small investors now have a great many more options of what they can use and how they can expose themselves to volatility. The author points out using collar options and future contracts as two such strategies available to those with more modest portfolios. Structured notes and ETFs are other more complex avenues that could be included in a portfolio strategy that anticipates or insures against unusual market fluctuations.