VIX Trading Strategies in July

We’ve tested 23 simple strategies for trading VIX ETPs on this blog (separate and unrelated to our own strategy). And while I can’t speak for all traders, based on all of my readings both academic and in the blogosphere, the strategies we’ve tested are broadly representative of how the vast majority of traders are timing these products.

There was a wide disparity in the performance of those strategies in July, based on how each responded to the VIX spike that began in late June and carried into the early part of the month. Many moved to defensive positions (cash or long vol) just as the VIX began to fall. Below I’ve shown the July results of all 23 strategies we’ve blogged about previously, trading the short-term VIX ETPs XIV and VXX. Read about test assumptions or get help following these strategies.

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See the end of this post for links to all of the strategies included in this report.

The month’s top performing strategies all maintained a stubborn inverse vol position in the face of the VIX spike. That was a gutsy move for sure, and one that could have turned sour quickly had the Greek debacle du jour not sorted itself out so quickly.

We also took the same stubborn inverse VIX position in our own portfolios based on statistical reasoning. Actual stock market volatility didn’t support the level of fear that VIX futures and the spot were showing. When those data points conflict, it’s usually best to side with actual realized vol over measures like VIX futures and the spot, as historically, they’ve proven themselves bad forward-looking predictors.

We ended up underperforming in July however after reducing allocation for four days during the subsequent market recovery for the opposite reason as was described above (i.e. our model read implied vol as being too low relative to historical vol). That was an untimely move as the VIX spot was able to maintain readings in the 12’s through most of the remainder of the month.

XIV and VXX are of course not the only show in town. Below I’ve rerun the same tests, this time applying each strategy to the less popular (or is it “underutilized”?) mid-term VIX ETPs ZIV and VXZ (click to zoom).

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Note that when any of these strategies signal new trades, we include an alert on the daily report sent to subscribers. This is completely unrelated to our own strategy; it just serves to add a little color to our daily report and allows subscribers to see what other quantitative strategies are saying about the market.

Good Trading,
Volatility Made Simple


Stategies included in this report: First vs Second Month Futures, VIX vs Front Month Futures, VIX vs 1-Month Constant Maturity, VIX vs VXV Indices, V&M’s VIX:VXV Ratio, TM’s RSI(2)DFTB’s StDev Strategy, DFTB’s Spread Strategy, DDN’s Momentum Rotation, DDN’s VRP Strategy, 10/100-Day MA Crossovers, TWP’s Quadratic Fit, NAS’s VIX Futures Momentum, S&P 500 50/200-Day Crossovers, Brute Force Optimized VRP, LI’s Bollinger Band Strategy, LI’s SMA Crossovers, Evolution Capital Strategy, TTO’s VRP Strategy, MS’s Mean-Reversion, Macro Investor Strategy, QT’s VXV:VXMT Strategy, TTO’s Optimized VRP

VIX Trading Strategies in June

We’ve tested 23 simple strategies for trading VIX ETPs on this blog (separate and unrelated to our own strategy). And while I can’t speak for all traders, based on all of my readings both academic and in the blogosphere, the strategies we’ve tested are broadly representative of how the vast majority of traders are timing these products.

Strategy performance in June essentially boiled down to the position held during the massive VIX spike on Monday, when XIV/ZIV fell a whopping -16.7%/-5.8%. Because of the lack of significant tells in the VIX complex on the preceding Friday, almost all of the 23 strategies were short vol into the abyss. Below I’ve shown the June results of the 23 strategies we’ve blogged about previously, trading the short-term VIX ETPs XIV and VXX. Read about test assumptions or get help following these strategies.

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See the end of this post for links to all of the strategies included in this report.

The month’s four top performing strategies were all in cash during Monday’s spike, either because they’re mean-reversion plays and the VIX was low relative to recent history (MS’s Mean-Reversion and TM’s RSI(2)), or because they’re term-structure plays and key data points across the VIX complex weren’t sufficiently contangoed (TWP’s Quadratic Fit and the Evolution Capital strategy).

As previously mentioned however, there was little in the way of significant tells at Friday’s close of the impending doom on Monday (ex. the spot closed low, with little premium between futures and the spot), so I chalk that success up more to “dodging the bullet” than foreseeing the future. We track a lot of strategies here, and a handful are bound to be on the sidelines on any given day.

XIV and VXX are of course not the only show in town. Below I’ve rerun the same tests, this time applying each strategy to the less popular (or is it “underutilized”?) mid-term VIX ETPs ZIV and VXZ (click to zoom).

     20150701.03     20150701.04

Note that when any of these strategies signal new trades, we include an alert on the daily report sent to subscribers. This is completely unrelated to our own strategy; it just serves to add a little color to our daily report and allows subscribers to see what other quantitative strategies are saying about the market.

Good Trading,
Volatility Made Simple


Stategies included in this report: First vs Second Month Futures, VIX vs Front Month Futures, VIX vs 1-Month Constant Maturity, VIX vs VXV Indices, V&M’s VIX:VXV Ratio, TM’s RSI(2)DFTB’s StDev Strategy, DFTB’s Spread Strategy, DDN’s Momentum Rotation, DDN’s VRP Strategy, 10/100-Day MA Crossovers, TWP’s Quadratic Fit, NAS’s VIX Futures Momentum, S&P 500 50/200-Day Crossovers, Brute Force Optimized VRP, LI’s Bollinger Band Strategy, LI’s SMA Crossovers, Evolution Capital Strategy, TTO’s VRP Strategy, MS’s Mean-Reversion, Macro Investor Strategy, QT’s VXV:VXMT Strategy, TTO’s Optimized VRP

VIX Trading Strategies in May

We’ve tested 23 simple strategies for trading VIX ETPs on this blog (separate and unrelated to our own strategy). And while I can’t speak for all traders, based on all of my readings both academic and in the blogosphere, the strategies we’ve tested are broadly representative of how the vast majority of traders are timing these products.

Most of these strategies turned in solid performances in May on the back of yet another strong month for inverse VIX ETPs like XIV and ZIV. Below I’ve shown the May results of the 23 strategies we’ve blogged about previously, trading the short-term VIX ETPs XIV and VXX. Read about test assumptions or get help following these strategies.

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See the end of this post for links to all of the strategies included in this report.

There was a fairly consistent premium across the VIX complex in May (between historical vol, various measures of implied vol, and VIX futures). Most of these strategies key off of comparing some variation of those data points, hence the reason why most of these strategies maintained a short VIX position throughout the month. At the moment, all but 3 of the 23 strategies are short the VIX.

There will be a significant uptick in volatility at some point (perhaps tomorrow or perhaps months from now), and many of these strategies will almost certainly get caught trading the wrong direction for some length of time, but until then, it’s useful to remember that low vol regimes like these can continue for far longer than sanity would expect.

XIV and VXX are of course not the only show in town. Below I’ve rerun the same tests, this time applying each strategy to the less popular (or is it “underutilized”?) mid-term VIX ETPs ZIV and VXZ (click to zoom).

20150602.03     20150602.04

Note that when any of these strategies signal new trades, we include an alert on the daily report sent to subscribers. This is completely unrelated to our own strategy; it just serves to add a little color to our daily report and allows subscribers to see what other quantitative strategies are saying about the market.

Good Trading,
Volatility Made Simple


Stategies included in this report: First vs Second Month Futures, VIX vs Front Month Futures, VIX vs 1-Month Constant Maturity, VIX vs VXV Indices, V&M’s VIX:VXV Ratio, TM’s RSI(2)DFTB’s StDev Strategy, DFTB’s Spread Strategy, DDN’s Momentum Rotation, DDN’s VRP Strategy, 10/100-Day MA Crossovers, TWP’s Quadratic Fit, NAS’s VIX Futures Momentum, S&P 500 50/200-Day Crossovers, Brute Force Optimized VRP, LI’s Bollinger Band Strategy, LI’s SMA Crossovers, Evolution Capital Strategy, TTO’s VRP Strategy, MS’s Mean-Reversion, Macro Investor Strategy, QT’s VXV:VXMT Strategy, TTO’s Optimized VRP

VIX Trading Strategies in April

We’ve tested 23 simple strategies for trading VIX ETPs on this blog (separate and unrelated to our own strategy). And while I can’t speak for all traders, based on all of my readings both academic and in the blogosphere, the strategies we’ve tested are broadly representative of how the vast majority of traders are timing these products.

Most of these strategies turned in solid performances for the month on the back of a strong run in inverse VIX ETPs like XIV and ZIV. Below I’ve shown the April results of the 23 strategies we’ve blogged about previously, trading the short-term VIX ETPs XIV and VXX. Read about test assumptions or get help following these strategies.

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See the end of this post for links to all of the strategies included in this report.

There was a consistent premium across the VIX complex for the entire month of April (between historical vol, various measures of implied vol, and VIX futures). Many of these strategies key off of comparing some variation of those data points, hence the reason why most of these strategies maintained a short VIX position throughout the month.

XIV and VXX are of course not the only show in town. Below I’ve rerun the same tests, this time applying each strategy to the less popular (or is it “underutilized”?) mid-term VIX ETPs ZIV and VXZ (click to zoom).

     20150501.03     20150501.04

Note that when any of these strategies signal new trades, we include an alert on the daily report sent to subscribers. This is completely unrelated to our own strategy; it just serves to add a little color to our daily report and allows subscribers to see what other quantitative strategies are saying about the market.

Good Trading,
Volatility Made Simple


Stategies included in this report: First vs Second Month Futures, VIX vs Front Month Futures, VIX vs 1-Month Constant Maturity, VIX vs VXV Indices, V&M’s VIX:VXV Ratio, TM’s RSI(2)DFTB’s StDev Strategy, DFTB’s Spread Strategy, DDN’s Momentum Rotation, DDN’s VRP Strategy, 10/100-Day MA Crossovers, TWP’s Quadratic Fit, NAS’s VIX Futures Momentum, S&P 500 50/200-Day Crossovers, Brute Force Optimized VRP, LI’s Bollinger Band Strategy, LI’s SMA Crossovers, Evolution Capital Strategy, TTO’s VRP Strategy, MS’s Mean-Reversion, Macro Investor Strategy, QT’s VXV:VXMT Strategy, TTO’s Optimized VRP

VIX Trading Strategies in March

We’ve tested 23 simple strategies for trading VIX ETPs on this blog (separate and unrelated to our own strategy). And while I can’t speak for all traders, based on all of my readings both academic and in the blogosphere, the strategies we’ve tested are broadly representative of how the vast majority of traders are timing these products.

Most of these strategies turned in solid performances for the month. The popular “VRP” strategies performed particularly badly. Below I’ve shown the March results of the 23 strategies we’ve blogged about previously, trading the short-term VIX ETPs XIV and ZIV. Read about test assumptions or get help following these strategies.

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See the end of this post for links to all of the strategies included in this report.

The popular “VRP” strategies (DDN’s VRP, Brute Force VRP, TTO’s VRP, and TTO’s Optimized VRP) underperformed for the month as a result of miscalling the divergence in the VIX complex I discussed previously.

In short, implied volatility mid to late-month was low relative to historical volatility (favoring a long VIX play), but at the same time, VIX futures traded at an extra large premium to implied volatility (favoring a short VIX play). The VRP strategies, which key off of the relationship between implied and historical vol, ended up trading on the wrong side of that divergence.

This of course underscores the importance of taking a more holistic view when trading the VIX (or anything else for that matter) and not marrying any one single trading concept (read more and more).

XIV and VXX are of course not the only show in town. Below I’ve rerun the same tests, this time applying each strategy to the less popular (or is it “underutilized”?) mid-term VIX ETPs ZIV and VXZ (click to zoom).

20150331.03     20150331.04

Note that when any of these strategies signal new trades, we include an alert on the daily report sent to subscribers. This is completely unrelated to our own strategy; it just serves to add a little color to our daily report and allows subscribers to see what other quantitative strategies are saying about the market.

Good Trading,
Volatility Made Simple


Stategies included in this report: First vs Second Month Futures, VIX vs Front Month Futures, VIX vs 1-Month Constant Maturity, VIX vs VXV Indices, V&M’s VIX:VXV Ratio, TM’s RSI(2)DFTB’s StDev Strategy, DFTB’s Spread Strategy, DDN’s Momentum Rotation, DDN’s VRP Strategy, 10/100-Day MA Crossovers, TWP’s Quadratic Fit, NAS’s VIX Futures Momentum, S&P 500 50/200-Day Crossovers, Brute Force Optimized VRP, LI’s Bollinger Band Strategy, LI’s SMA Crossovers, Evolution Capital Strategy, TTO’s VRP Strategy, MS’s Mean-Reversion, Macro Investor Strategy, QT’s VXV:VXMT Strategy, TTO’s Optimized VRP