VIX ETP Strategies in May: Up, Up and Away

We’ve tested a number of simple strategies for trading VIX ETPs on this blog. 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 trading these products.

Most of these simple strategies turned in big returns in May, riding the strong performance in inverse VIX ETPs. Below I’ve shown the May and YTD results of the 13 strategies we’ve blogged about previously, trading XIV and VXX (read about test assumptions). For comparison, buying and holding XIV is also included in grey.

20140530.Table-ST

20140530.Graph-ST

As I’ve noted in the past, most of these strategies have struggled YTD, mainly due to getting defensive at precisely the wrong time following volatility spikes earlier in the year. But as I’ve also noted in the past, I think the general concept of becoming defensive in the face of rising volatility is definitely still the smart play long-term.

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).

20140530.Table-MT     20140530.Graph-MT

Click to read more about all of the strategies covered in this report and to see Volatility Made Simple’s own elegant solution to the VIX ETP puzzle.

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

Good Trading,
Volatility Made Simple

Posted in Real-Time Analysis.