<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The stock market was closely mixed Monday morning, while investors continued to struggle against the ups and downs of the earnings season while taking into account the risk of conflict in the geopolitical and macroeconomic areas. Dow Jones Industrial Average (DJINDICES: ^ DJI) was down 32 points to 25,074. The broader market measures were generally higher, S & amp; P 500 (SNPINDEX: ^ GSPC) climbed 2 points to 2.710 and the Nasdaq Composite (NASDAQINDEX: ^ IXIC) data-reactid = "11"> The stock market was little mixed Monday morning, as investors continued to struggle with the ups and downs of the earnings season while taking into account the risk of geopolitical conflict. Macroeconomic. Starting at 11:15 am EST, the Dow Jones Industrial Average (DJINDICES: ^ DJI) was down 32 points to 25.074. The broader market measures were generally higher, S & P 500 (SNPINDEX: ^ GSPC) climbed 2 points to 2.710 and the Nasdaq Composite (NASDAQINDEX: ^ IXIC) rose 14 points to 7,313.

It's only been a few months since December has plunged the S & P 500 into its worst levels since mid-2017. The abruptness that caused the stock market index to fall nearly 20% from its highs was a shock for many who had benefited from the gains of the bull market over the last 10 years. However, since then, most stock market fears have moderated – and investors seem almost too complacent as they dismiss concerns that worried them by the end of 2018.

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Volatility signals are going well

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "A way for investors to consider turbulence expectations in the financial markets is using what is called the Volatility indexor VIX. This benchmark examines option prices to determine the magnitude of uncontrolled investor movements in the near future, with higher values ​​indicating a higher probability of extreme movements, while lower values ​​indicating less sudden movements for the stock market. "data-reactid =" 26 "> Investors analyze the expectations of turbulence on the financial markets using what is known as the volatility index, or VIX This benchmark examines the price of options to determine the amount of the rise and fall.Investment investors believe to be in the cards in the near future, with higher readings indicating a greater likelihood of extreme movements while a lower reading indicates less sudden movements for the stock market.

As a reminder, the volatility index has spent most of the past few years among teenagers, reflecting relatively low expectations for strong upsurges or market crashes. Even after seeing some downward trend in the market early in the fall, the volatility index fell well below December 20. Yet by the end of the month, readings of 30 to 35 were becoming commonplace as Dow and other stock indexes fell. .

In January, this trend reversed. Shares rose and volatility declined to mid-teens. This in turn prompted many investors to return to an extremely lucrative risky business for most of the early to mid-2010s.

Play with volatility with special investments

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "There are publicly traded products that expose you to movements of the volatility index. iPath S & 500 VIX ST Futures ETN (NYSEMKT: VXX) value increases when volatility increases, while ProShares Short VIX Futures Short Term (NYSEMKT: SVXY) increase in value as volatility levels decrease. As you might expect, December was a good month for investing in iPath volatility, which saw its stock price rise by 36%. The ProShares fund, however, lost 16% in December. "Data-reactid =" 30 "> There are listed products that expose you to fluctuations in the volatility index. iPath S & P 500 VIX ST Futures ETN (NYSEMKT: VXX) sees its value increase when volatility increases, while the shares of the ProShares Short VIX Futures Short Term (NYSEMKT: SVXY) increases in value as volatility levels decrease. As you might expect, December was a good month for investing in iPath volatility, which saw its stock price rise by 36%. The ProShares fund, however, fell 16% in December.

But with the market rally, the ProShares fund has reaffirmed its dominance. The fund's shares are up 16% since the beginning of 2019, compared to a 17% decline for investment in iPath.

When markets were generally rising between the early and mid-2010s, investments such as the ProShares Short Volatility Fund performed extremely well. Between the end of 2011 and January 2018, the fund's shares rose by 2,400%. Meanwhile, long volatility funds have lost almost all their value.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The problem, however, is that complacency can lead to catastrophic consequences. just one day last february, the ProShares fund has foregone virtually all of its gains in recent years – due to the sharp rise in volatility levels. The spike led to the liquidation of a similar fund with short volatility, exposing investors to complete losses. "Data-reactid =" 33 "> The problem, however, is that complacency can have catastrophic consequences: In one day, last February, the ProShares fund gave up almost all of its gains during in recent years, as volatility has skyrocketed, causing the liquidation of a fund with similar similar volatility, exposing investors to a complete loss.

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Watch out for stocks

After a sharp decline, it is good to see the stock market regain lost ground. However, it is important not to become too complacent as an investor. Instead, be aware of the risks, but find opportunities whose potential benefits outweigh those risks. In this way, you will be ready for anything that happens in the markets.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 40 "> More from The Motley Fool

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Dan Caplinger has no position in the mentioned actions. The Motley Fool has no position in any of the actions mentioned. The Motley Fool has a disclosure policy."data-reactid =" 48 ">Dan Caplinger has no position in the mentioned actions. The Motley Fool has no position in any of the actions mentioned. Motley Fool has a disclosure policy.