How to use market volatility to your advantage

Market volatility can be a powerful indicator for investors. Bob Lang, contributor at TheStreet Pro breaks down what the Volatility Index really tells us and shares tips for protecting your portfolio during uncertain times.

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Full Video Transcript Below:

BOB LANG: What does it tell the average investor. Basically it tells the average investor to use some caution and protect their portfolios. Volatility index tends to move up and down with when the markets are are worried or are acting very complacent. So when the market is is moving higher, we have a lot of complacency in the markets. We see volatility starting to move down and people are not concerned or worried about markets going down. But when the volatility index is going up, we see people reaching for protection or getting scared. They're getting worried and nervous or selling stocks and it really is a difficult situation. But if you're if you're in there in the markets right now to to make money, what you need to do is you need to protect your portfolios. The best way to protect your portfolio is to buy some put options. Put options are cheap. When the markets are up. When the volatility is down, they tend to get more expensive when volatility is rising. But on days when the markets are getting pounded, you're really happy to have that protection in place once it's there.

Well, if if you're if you're spooked by them all the market volatility I will tell you this. If you have a long term investment horizon, say 2530 years, use the market volatility as an opportunity to get involved in the stock market and to add to your holdings, and to buy stuff that has gotten beaten up quite, quite significantly. And there we see opportunities like drops in the markets happen all the time, and they've been happening all through history and they've always been great buying opportunities. Look, the stock market goes from the bottom left to the upper right. If you look at a long term chart of of the stock market, even if you look back 25, 50, 75, 100 years, that's the case. Even big pullbacks like we had back in 1987 when the market crashed. It just shows up as a blip on the screen. It was a great opportunity to get in there and start buying stocks. And that was nearly 40 years ago. So I think that you've got to keep a level head. You have to have some protection on always have some cash available. And when when opportunities come in front of you to buy stocks, just go ahead and do it.