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How to hedge volatility with ETFs

As inflation concerns started to build up, U.S. stocks have started faltering this month. After notching the biggest one-day drop in its history on Monday, the Dow Jones witnessed violent swings in Tuesday’s trading session to post the biggest rally since January 2016.

Notably, the blue-chip index traded in a range of nearly 1,200 points, changing direction 29 times over the course of the session before surging in the final hour to close up 2.3%. This marks the second-biggest intraday trading range in the Dow’s history. This indicates heightened volatility in the stock market.

The CBOE Volatility Index (VIX), also known as the fear gauge, hits 50 for first time since 2015 on Tuesday before retreating to 30 at the close, which was still above its historic average. The index soared 115.6% on Monday — its biggest one-day jump on record. The fear gauge measures investors’ perception of the market’s risks and tends to rise when stock falls or investor panic starts to set in.

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