2 Ways To Profit as the VIX Spikes — No Matter What Comes Next

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.

What Does a $VIX at 30 Mean?

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).

A Closer Look at UVXY

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. 

Personally, when I buy it, the clock starts ticking instantly for when I will sell it. If you do not like watching your ETF positions every day, UVXY is a tough one to own. That said, I also see it as a decent, albeit imperfect, surrogate for owning put options — without an expiration date, as options have. 

For the Market Contrarian: SVXY

Conversely, SVXY is a tool for the market contrarian who believes the worst is over. SVXY offers inverse exposure to VIX futures, meaning it gains value when volatility declines and markets return to a state of calm. 

Essentially, SVXY provides a way to profit from the "volatility crush" that typically follows a peak of fear. While it carries its own significant risks, particularly if volatility continues to climb, it represents a stabilization bet in a landscape defined by current turmoil.

The divergence between these two ETFs highlights the high-stakes choice facing investors. Whether pouncing on the continued upside of fear with UVXY or betting on a return to normalcy with SVXY, the key is understanding that these products are built for the current lightning-fast market environment. As the VIX hovers in this new territory, it is putting investors on notice. The buy-the-dip era is facing its most rigorous challenge yet.

Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob's written research, check out ETFYourself.com.