{"id":57884,"date":"2025-01-08T14:35:28","date_gmt":"2025-01-08T13:35:28","guid":{"rendered":"https:\/\/www.captrader.com\/?post_type=blog&p=57884"},"modified":"2025-10-01T14:02:38","modified_gmt":"2025-10-01T12:02:38","slug":"safe-start-to-the-year-hedging-strategies-for-volatile-markets","status":"publish","type":"blog","link":"https:\/\/www.captrader.com\/en\/blog\/sicherer-jahresstart-hedging-strategien-fuer-volatile-maerkte\/","title":{"rendered":"A safe start to the year: hedging strategies for volatile markets"},"content":{"rendered":"

The year 2025 begins with an unusual market situation: a low VIX and an overvalued US equity market raise questions about stability and possible market movements. Although no one can predict the exact timing of a correction, historical data shows that the first quarter is often characterized by an increase in volatility.<\/p>\n\n\n\n

In this article, we look at how options traders can prepare for this phase. With well thought-out hedging strategies that target the VIX - such as short puts or bull call spreads - you can not only hedge risks, but also take advantage of opportunities for moderate profits. Instead of speculating on extreme scenarios such as a VIX of 60, the focus is on practical approaches that target realistic market movements. In this blog post, Alexander Eichhorn shows which VIX strategies he currently considers profitable.  <\/p>\n\n\n\n

Have the markets run hot?<\/h2>\n\n\n\n

In 2024, the S&P 500 recorded an impressive performance with an increase of almost 24 %. The current gap between the S&P 500 and its 200-week EMA is around 23 %, which is exceptionally high from a historical perspective.<\/p>\n\n\n\n

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S&P500 Performance<\/figcaption><\/figure>\n\n\n\n

The S&P 500 has staged an impressive rally over the past year, but it may be showing signs of overheating. Nevertheless, it is important to note that bull markets can often last for long periods of time and market sentiment can remain greedy for a long time. We therefore consider a purely passive wait-and-see approach for a correction or a crash to be of little use. Instead, we expect a moderate increase in volatility in the first quarter. The combination trades presented below can also be used to benefit from stable volatility, creating additional opportunities.<\/p>\n\n\n\n

VIX rise in the first quarter?<\/h2>\n\n\n\n

There is no question that the US equity market is currently highly valued. However, the timing of a possible correction is uncertain and could be delayed for weeks or even months. For this reason, we believe it makes little sense to blindly short the stock market.<\/p>\n\n\n

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Source: Tradility.com<\/a><\/figcaption><\/figure>\n<\/div>\n\n\n

Instead, we prefer to use diversified hedging trades on the VIX<\/a>as this statistically indicates an imminent rise. Historically, the VIX has regularly shown values of over 20 between January and March in recent years. The only exception was 2017, when the VIX was at 13.22 - a phase characterized by the so-called \"Fed put\", which was characterized by the US Federal Reserve's hedging measures.<\/p>\n\n\n\n

Given the current low level of the VIX and a possible increase in the first quarter of 2025, we currently see promising opportunities for lucrative VIX trades. These strategies could prove effective in making the most of potential volatility swings.<\/p>\n\n\n\n

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Video: Trading idea with options on the VIX from options expert Alexander Eichhorn<\/figcaption><\/figure>\n\n\n\n

Hedging strategies - examples<\/h2>\n\n\n\n

Short Puts<\/a><\/strong><\/p>\n\n\n\n

Short put strategies on the VIX index should be used with particular caution by options traders, as the puts sold can quickly run into the money if the VIX has a pronounced contango curve. Nevertheless, taking into account appropriate risk management, they offer interesting approaches for a hedging trade on a potential increase in volatility in the first quarter.<\/p>\n\n\n\n

An example of suitable short puts could be the following VIX options<\/a> be:<\/p>\n\n\n\n