The stock market had its lightest trading day of the year yesterday. The SPY (tracking ETF for the S&P 500) traded 50 million shares. While the markets were mixed, the VOLATILITY S&P 500 (INDEXCBOE:VIX) closed down almost 4%, below 12.00. The volatility index (VIX) measures fear in the market. A reading below 12.00 shows total complacency, no fear at all. Historically, when the VIX is below 12.00 it has ALWAYS been a great buying opportunity. In fact, history shows that buying the VIX below 12 will almost always net a near term pop to 18+. This is a whopping 50% return. Essentially, the markets work in a contrarian way. When fear is absent to such a degree from the stock market, usually the markets top. When the markets fall, fear increases and the VIX jumps higher.

With a closing level of 11.97 today on the VIX, a huge opportunity presents itself. Historically the VIX has only really ever dropped to the 10-11 range, and that is extremely rare. That means that the once a decade risk is 10% while the upside is 50%. In a risk to reward basis, this is an awesome opportunity. To trade the VIX, the average investor can buy the iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX).

By Pro Trader

Jenny Rebekka