The economic factors which are at play due to Covid-19, but by just as much of the impact the economies of the world have suffered indicate to me that the VIX is an excellent hedging instrument in these uncertain times.
As of recent, "bad data" (regarding corporate earning or covid stats) didn't seem to effect the markets due to a massive global stimulus, as well as the fact that markets are forward looking (as well as corporate bond buying programmes). YET, the BOE just announced today to keep rates at 0.1% and by boosting purchases to GBP100 billion, and the FTSE dropped on the news... Maybe this along with the technicals (and with the recent 40% S&P rally) and the news reports of second wave outbreaks has had an effect on the minds of investors, and maybe the bears are starting to win ground. Obviously, Don't fight the FED. But we saw a decline last week due to virus updates and markets have been volatile ever since. Increasingly so.
With the "reopening of the economies" (I mean in a more global sense, with individuals interacting with one another and moving away from social distancing), and the fact that US new infection rates have surged in States like Texas and Florida (not to Brazil and Latin America), this COVID-19 Virus is proving resilient.
China has has implemented part lockdowns in outbreak areas. While global cases still increase. This website is highly informative:
While this may have started in Wuhan, THE US maybe the next hotspot from where this second wave (if hasn't already hit), as the situation there was simply not prepared to an efficient and supplied way. Unfortunately, approx 22% of all those whole died due to Covid were from the US, as of today.. the human cost of this Virus has been terrible and ruined many lives.
Trump has made it clear he will not close the economy down. Whether this will be the case, as it is a generally broad statement, individual States may start lock down measures as infections increase.
By the way.......this has all not talked about other global such a US-China-HK, Brexit, Escalating N&S Korea tensions, Q2 EARNINGS!!! as well as Russia to mention a few...
OH.....and we still have really recovered since 2007/8 regarding interest rates. Gives Central bankers little wiggle room, hence ......
i think it is clear that this is going to be a volatile year-18months (yet hopefully a lot shorter due to a discovery of a vaccine, but I hate to say that in my opinion is optimistic as the economic damage may be very severe).
So in my opinion the current upside value lies in 2 areas
1) Can be used as an equity hedge.
2) Can be played for a long trade.
Both can have a relatively safe stop loss at 29 or 31 but that obviously down to ones own risk appetite. Potentail upside in my opinion would be a TP1 of 39.5 and TP2@48.5.
I hope you are all as safe as you can be.