Worried About Market Volatility? Look to Options

A hot March CPI report sparked heightened market volatility as investors weigh the ever-changing interest rate narrative. For investors looking to position their portfolio amid ongoing uncertainty, options strategies that benefit from increased volatility are worth consideration.

Rising interest rates and inflation ushered in a new era of increased market volatility. The removal of the "Fed put" in markets and the artificial volatility suppression it created now opens a window of opportunity for several strategies that capitalize on volatility.

“We certainly have seen over the last couple of years that broader equity market volatility has shifted into a higher range,” Michael Buckius, CFA, president, CEO, and CIO of Gateway Investment Advisers, explained in a video on 2024 equity volatility investing. “Actually, it’s a more normal range if you look at a longer span of history.”

Volatility Creates a Beneficial Environment for Options Strategies

Option writing strategies benefit when volatility increases, driving up the prices of the options. This, in turn, creates greater premiums earned for those writing options and higher income potential.