Opportunity in Uncertainty
The past week has been an unpredictable one in the markets, with mixed economic data producing sudden spurts of movement amidst a day of otherwise sedate behaviour.
Wall Street has traded broadly sideways for most of the last week, albeit with twitches higher and lower which threatened to prove decisive before settling back into the routine. Thursday's sudden leap upwards off the back of strong data from the International Monetary Fund and US bank State Street, however, seems to have proved the real deal.
Cable, meanwhile, has been showing the same sideways movement since its spike on 1 July, as data out of the US suggesting the American economy could be backsliding weakened the US dollar. The boost to indices over the last couple of days has yet to sink its claws into the currency pair, but could see the dollar's fortunes reversed over the longer term.
Dealing on volatility
With such unpredictable behaviour from the markets, it might seem the only option is to retreat and wait for the storm to subside, until the available data provides a more reliable indicator of the direction the wind is blowing.
Spread betting with IG Index, however, gives you the tools to take advantage of this uncertain volatility. There's no need to seek shelter, but instead you could take a profit from market volatility - or the lack of it - with Options or Binaries spread bets.
Options
If you believe a market is going to be volatile on a particular day, you can buy into matching positions either side of the current IG Index price. If the market breaks, no matter which direction, you profit from the movement and all you have lost is the value of the two premiums paid to set up the bet.
Similarly, if you believe the market isn't going anywhere, you can back up your opinion by 'selling volatilty'; selling a call/put pair either side of the current price and effectively setting up a 'tunnel' which you believe the price will remain within. As long as the price doesn't break through those tunnel walls, you take a profit based on the premium paid and the size of your bet. (It is important to understand, however, that when selling options your potential risk is unlimited.)
Take a look at our Options pages for further details of these spread betting strategies.
Binaries
Binaries are simple yes/no bets of set duration, making them ideal for buying or selling volatility over a strictly limited term. If you think the markets are due a spell of volatility, you can buy a pair of 'up/down' binaries straddling the current price and profit from market movement no matter the direction. If you expect little movement, or movement in a single direction you can 'sell' a OneTouch binary in the opposite direction - should the market price fail to reach the specified level you'll be in profit.
You can also make use of our 'Tunnel' binaries, which set barriers above and below the current price; you 'buy' the binary if you expect the market to be volatile, and 'sell' if you expect it to remain at or near its current value.
Take a look at our Binaries pages for further details of these spread betting strategies.
Take a position
Whether you think further market volatility lies ahead or we're in for a calmer stretch, with IG Index you can back your judgement on a range of financial markets.
We offer competitive spreads for Options bets on indices, forex and commodities, among others. Our fast-moving Binary bets are also available, on a range of markets including extreme short-term bets of five and twenty minutes on the FTSE, Germany 30 and Wall Street.
To get started spread betting today, simply apply online.
Updated: 09/07/10