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).

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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

Posted in Real-Time Analysis.