Warrior Trading Blog

Top ETFs for Day Trading Volatility

Day Trading Volatility

Volatility is a universal feature of every market, which is why it is such a critical topic in contemporary trading. Every trader, regardless of their personal strategies and favored classes of security, needs to be aware of the rate of price deviation in the securities that they trade.

Some traders see it as an opportunity for profit, while others see it as a threat to be guarded against. Day traders in particular need to account for it in their trading strategies, as they are looking for sharp swings in prices over a relatively short period of time.

Fortunately there are now a wide variety of synthetic securities for traders to use to enhance their strategies and maximize their profits with respect to volatility. Day traders have a range of choices for trading on the rate of price deviation, including the top ETFs listed in this article.

What Is Volatility?

The textbook definition is the rate at which a security’s price rises or falls for a set amount of generated return. It is quantified using the standard deviation of annualized return over a given time period, and demonstrates the range that a security’s price can rise or fall.

When a security’s price fluctuates rapidly over a short period of time, that security is said to display high volatility. If a security’s price fluctuates slowly over that same time period, then it is said to display low volatility.

What Is the VIX (Volatility Index)?

Day Trading Volatility


The VIX is the core measure from which a number of different synthetic securities are based. The VIX is also widely known as the “fear index”. The VIX is calculated using the implied volatility of an option set on the S&P 500, including those nearing expiry and those that expire during the following month.

The concept behind the VIX is to select an option set that is representative of the level of volatility that the derivatives market expects for the coming 30 day period.

The VIX is crucial because of its relationship with the direction of the market. Generally, a rising VIX will mean that the market is set for a substantial decline, which is why VIX based securities are so popular as a hedge against a declining market.

It is crucial to remember that there is not a fixed correlation between the VIX and the actual price swings of the S&P 500, and there are many instances of the actions of the derivatives market failing to reflect shifting price swings in the securities in the S&P 500.

The Top VIX ETFs for Day Trading

The following ETFs and ETNs are the top 5 choices for day trading based on key factors, such as their expense ratio, total assets and liquidity.

Day traders are looking for ETFs with large trading volumes so that they are liquid, large total assets so that they are less affected by short term inflows and outflows, and low fees so that a day trader’s smaller, short term price swings are not eroded by high fees.

Some of our favorite ETFs for trading volatility are below. The $UVXY and $VXX are typically the most popular.

$UVXY – ProShares Ultra VIX Short-Term Futures ETF

$SVXY – ProShares Short VIX Short-Term Futures ETF

$TVIX – VelocityShares Daily 2x VIX Short-Term ETN

$VIXY – ProShares VIX Short-Term Futures ETF

$VXX – iPath S&P 500 VIX Short-Term Futures ETN

These aren’t products you generally hold on to for a long time and are best suited for hedging portfolios or scalping intraday.


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