The shutdown of the federal government last week has deprived investors of the one thing they need the most to make informed decisions: information. Until the shutdown is over, we won’t see data from any of the federal agencies that generate those numbers.

For example, we were supposed to see the employment figures for September last Friday. But since the shutdown began earlier that week, we can only wonder what those numbers produced by the Bureau of Labor Statistics (BLS) might have looked like.

We did see an employment report from outplacement firm Challenger, Gray & Christmas last week that indicated private companies are hiring the fewest workers since the Great Recession sixteen years ago. However, those numbers could be quite different from the more substantial survey conducted by the BLS.

If the shutdown ends in a week or two, then the missing data probably won’t matter much. But if it goes on for more than a month as happened the last time the government shutdown in 2019, by the time we see those numbers the stock market may be far removed from where it otherwise might have been.

For that reason, I believe betting on heightened volatility is a smart way to protect your portfolio from the possibility of a major stock market move after the government reopens. The problem is, it could move up or down depending on what the missing numbers turn out to be.

One Way or Another

Since we don’t know which direction the stock market will go, I suggest betting on both. You can do that by employing an options strategy known as a long straddle. That means we will buy both a call and a put option using the same strike price and expiration date on an underlying security that we believe is likely to react strongly to heightened stock market volatility.

An obvious candidate for such a trade is the CBOE Volatility Index (“VIX”), which is sometimes referred to as the “fear index” since it reflects the degree to which professional portfolio managers think the risk of a stock market correction is imminent.

If you are not familiar with the VIX, it is a ratio of short-term put options versus call options on the SPDR S&P 500 ETF (NYSE: SPY). When professional investors are feeling anxious and buy more calls than puts, the VIX goes up. The opposite is also true.

At the start of this week, the VIX was trading near $17. That is very close to where it has been trading for the past five months, and is close to its longer-term historical average, too. In other words, Wall Street does not perceive much near-term risk to the stock market despite the dearth of economic data until the shutdown is over.

Timing is Everything

To execute a long straddle on the VIX, we must identify an expiration date and a strike price for both options. For the sake of this example, I will use the $17 strike price that expires on November 19.

A few days ago, that call option could be bought for $4.50 while the put option was going for $0.25. That means it would cost $4.75 to purchase both options. For this trade to be profitable, the VIX must rise above $21.75 or fall below $12.25 within the next five weeks.

The odds of the VIX falling below $12.25 are low. That hasn’t happened in a long time. But the chances of it rising above $21.75 are much better. In April, it briefly spiked above $60 when the Trump administration introduced its “liberation day” reciprocal tariff plan.

Let’s say the government reopens around the end of this month and we learn that the economy is in much worse shape than we thought. In that case, the VIX might soar above our breakeven price of $21.75. If gets up to $25.50, the combined value of both options would be at least twice what we paid for them.

Of course, this type of trade is not without risk. If the government does not reopen by the time these options expire, then professional money managers may have reason to suddenly load up on put options on the SPY. For that matter, the government may reopen before these options expire and we discover that the economy is in better shape than we thought, in which case the VIX probably won’t move enough for this trade to be profitable.