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.



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

Posted in Real-Time Analysis.