The Bread-and-Butter of VIX (Swing-Trading) Strategies

Our strategy has held its current position (long XIV or ZIV) for 50 trading days so far, gaining 44% trading XIV or 19% trading ZIV.

In this post I look at how often our strategy has held a position for such a long time, but note that the conclusions reached here would be applicable to most of the simple strategies we’ve discussed previously on this blog.


The graph above shows the cumulative number of trading days we would have spent in a given position from 07/2004 to the present. Our current position (50 days) is only the 17th longest.

At first glance, it looks as if most of our trades are of this longer variety, but that would be incorrect. The table below shows the number of positions we would have taken historically based on length. Note how the vast majority of trades (67%) would have lasted less than 1 week.


Note too how longer positions tend to be more often profitable (see right-most column).

Our strategy and most of the simple strategies we’ve talked about on this blog are, in a roundabout way, akin to momentum strategies. They tend to take a position when the market is already moving in a favorable direction (as opposed to mean-reversion strategies, which take a contrarian position).

That means that positions that survive unchanged for longer tend to be more profitable (otherwise the strategy would likely have already made a change). These lengthier positions, like the one we’re in currently, are really the bread-and-butter of how most VIX (swing-trading) strategies generate return.

Click to see Volatility Made Simple’s own elegant solution to the VIX trading puzzle.

Good Trading,
Volatility Made Simple

Wonk note: data prior to the launch of XIV and VXX has been simulated. We’re able to do this accurately using a combination of the indices and the futures data on which these ETPs are based. Read more about simulating data for VIX ETPs.

Posted in Strategy Mechanics.