Buy the VIX Now

Stocks have been rallying over the past six trading sessions, sending the Chicago Board Options Exchange Volatility Index (VIX) plummeting.

The VIX is a widely watched barometer of market fear that tracks the implied volatility for S&P 500 index options. Currently, the VIX has fallen to 23.68 from levels above 35 at the beginning of July.

While the technical outlook for stocks is starting to firm up and the rally could continue for some time, macro trends suggest that there is still considerable risk in investing at these levels. Therefore, investors should consider buying call options on the VIX or the iPath S&P 500 VIX Short Term Fund ETF ) as a hedge against declining stock prices.

The price of buying volatility right now is relatively cheap and serves as a very effective insurance policy against another big leg down in the stock market. It will also allow you to sleep at night. If you are bullish, buy stocks now (they look inexpensive), but don't do so without protecting your downside - pick up some protection in the form of the VXX or call options on the VIX.

Jason Raznick is the business editor of Benzinga.com.