With the Europe debt crisis causing uncertainty in the financial market and concerns over a possible recession, market volatility has soared. According to Bloomberg, the VIX rose 160 percent to 42.96 in the third quarter as the Standard & Poor's 500 Index fell 14 percent, the biggest retreat since 2008. The VIX, often referred to as the fear index, represents one measure of the market's expectation of stock market volatility over the next 30-day period. With US unemployment rate at a high of 9.1 percent and likely to remain the same, I feel that this week's market rally could be short-lived as the economy's basic fundamental is still not stable.

Although the US Federal reserve plans to keep interest rates low to stimulate the economy, investors should be cautious of the inflation that would result of such stimulus. Holding too much cash at hand is not advisable as inflation would erode its value.

In times of uncertainty, I feel that investors should look to diversify their portfolio. In volatile markets, investors move to commodities such as gold and silver as they tend to be inversely related to equities. Investors can participate in the commodity market by investing in different ETF that track commodity prices. Investors who want to participate in the movements of VIX can trade ETF such as VIXY and VIXM, which tracks the short-term and mid-term VIX futures.