VIX ETPs like XIV and VXX have exploded in popularity in recent years.
Without a doubt, part of investors’ love affair with VIX ETPs is a product of their recent success. In 2013 alone, XIV returned an impressive 107%, and it’s less volatile cousin ZIV 63%. But many of these same investors are unprepared for the significant risks that accompany those returns. These same two ETPs, as recently as 2008, suffered horrific drawdowns of -92% and -78% (1) respectively.
Sophisticated investors too have flocked to VIX ETPs, but not because of those impressive (but fleeting) returns. To the sophisticated investor, VIX ETPs offer unique characteristics not available in traditional asset classes. Not only are they driven by the performance of the market (bull markets favor inverse VIX ETPs, and vice-versa), but they are also driven by unique factors like the VIX futures term-structure (contango favors inverse VIX ETPs, and vice-versa).
At Volatility Made Simple we make analyzing and trading these complex instruments simple. Our strategy averages less than one trade a week, does not require sitting in front of the computer all day, is completely quantitative and systematic, and has successfully navigated the changing trends of VIX ETPs.
We offer subscriptions to our strategy for as little as $1 a day. Subscribers receive each day’s signal prior to the market open and enter orders at any point in the day for automatic execution at the close using a market-on-close (MOC) order.
1. VIX ETPs are a recent addition to the investing world and historical data only goes as far back as 2009/2010. Data from 2004 to the launch of each ETP is simulated. We’re able to do this with a high degree of accuracy using a combination of the indices and futures data on which these ETPs are based. Read more about simulating data for VIX ETPs.