As the markets wait for a potential solution to the US government shutdown and approaching debt ceiling, it's a good time to ponder event risk and how to trade...

As the markets wait for a potential solution to the US government shutdown and approaching debt ceiling, it's a good time to ponder event risk and how to trade it. Often times, hedging against event risk (or speculating on it) involves trading volatility products, such as the VIX (CBOE S&P 500 Volatility Index). The VIX is often considered the investor fear gauge and measures volatility expectations over the next 30 days. As the premier volatility benchmark, VIX has been the go to investment product to trade ahead of a possible market-moving event. However, that could soon change with the CBOE's introduction of the VXST (S&P 500 Short-Term Volatility Index). Instead, of looking ahead 30 days, VXST only uses a 9-day horizon. Thus, it will be more responsive to short-term moves in the S&P 500 - and an ideal event-risk trading product.