By Steven M. Sears

Disagreement makes markets -- and volatility.

Huge swaths of investors, and even entire markets, disagree over the growth rates of corporate earnings and the economy. Yet the primary barometer of stock and options volatility, the Cboe Volatility Index, or VIX, is acting like everything is fine.

Many stock analysts think corporate earnings will keep growing over the next few quarters. If they are right, stock prices should advance. Many economists think President Donald Trump's tariff policies are bad for earnings and corporate and consumer spending. If they are right, stocks should decline.

All pricing arguments ultimately end with a victor -- and that suggests options volatility might be too low at a time when the data is debatable.

Goldman Sachs equity strategists foresee second-quarter earnings-per-share growth of 4%, down from 12% in the first quarter and 15% in the fourth quarter. Low expectations mean companies will likely report better-than-expected earnings -- which seems good, but it also means investors are likely to dismiss the results because analyst estimates were too easy to beat.

At 17.38, the VIX indicates that the S&P 500 index will move about 1.08%, up or down, over the next 30 days.

Given the disagreements and anxiety over tariffs, we remind investors that it helps to view stock volatility as an opportunistic tool to buy more of a good stock at a lower price -- and options are another trading tool that can help.

The key is owning good companies and remaining invested no matter what. We favor blue chips that ideally pay dividends. It's a simple formula that many people have trouble implementing, which exacerbates volatility and creates more opportunities for those who can -- which brings us back to corporate earnings and the disconnects that define the broad markets.

Several stocks allow investors to monetize volatility without the complexities of VIX options or futures.

Equity proxies for volatility include Charles Schwab, whose clients range from tyros to sophisticates; Interactive Brokers Group, which caters to the very sophisticated; and Robinhood Markets, which appeals to younger investors with an appetite for volatility, cryptocurrencies, and buying stock dips. Exchanges such as Cboe Global Markets, CME Group, Intercontinental Exchange, and Nasdaq make money off trading volumes, which often rise in reaction to market volatility. Nervous investors trade more.

Each company has its distinct merits. Let's use Robinhood to illustrate a strategy template for the equity volatility theme. The online brokerage is exhibiting mastery over its business and a deep understanding of its customers.

Robinhood is scheduled to report earnings on July 30. If earnings season is volatile, the stock should benefit.

With the stock at $99.54, aggressive investors could consider selling a September $95 put option, buying a September $105 call option, and selling the September $115 call. If the stock is below $95 at expiration, investors should buy the stock and make it a long-term holding.

If the stock is at $115 or higher at expiration, the call spread -- which entails buying one call and selling another with a higher strike price and same expiration -- is worth a maximum profit of $6.75, though the initial cost was $3.25. Investors also keep the put premium of about $8.65.

We chose a September expiration because concerns over corporate earnings and tariff concerns are unlikely to go away. Plus, September is historically the most volatile month of the market year, and the Federal Reserve may lower interest rates then.

Maybe everything ends well. Maybe not. Either way, thinking ahead always makes sense.

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July 18, 2025 21:31 ET (01:31 GMT)

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