Embrace volatility
A downturn in stocks almost certainly means volatility -- that seesawing action that makes cable pundits shriek and individual investors worry. Why not try o profit from it? One easy way to play volatility is to buy exchange-traded notes (ETNs) that track the "fear gauge" known as the VIX. They rise in value when investors worry that the stock market will fall.
As Fortune wrote back in June, one popular ETN is the iPath S&P 500 VIX short-term futures ETN. It follows the VIX and rises when options traders buy insurance to protect against a falling market. The ETN is not for everyone: it fell more than 65% this year before spiking in November. But if you think stocks are ready to fall, this is a way to juice your bet.
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Last updated December 29 2010: 12:03 PM ET
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