Strategies

Overview

Those seeking to offset risk on to others (hedgers) tend to be relatively price insensitive compared to those who are willing to assume that same risk (speculators).  This can be seen in the tendency of implied volatility of S&P 500 options to overestimate realized volatility, and in the tendency of VIX futures to overestimate future spot VIX.  Theses premiums are collectively referred to as “volatility risk premiums”, or “VRP”.  In the stock market, hedgers effectively pay speculators VRPs to compensate them for assuming the volatility risk of the S&P 500.

Our strategies seek to capture the volatility risk premium present in the VIX term structure, without taking undue risk.  While we make quick adjustments to changes in the VIX term structure, we maintain a long-term perspective and accept that short-term drawdowns will inevitably happen from time-to-time.

We offer multiple strategies to accommodate varying risk tolerances, including both swing and intraday strategies.  The goal of each strategy is to outperform its benchmark on a risk-adjusted basis (achieve a higher Gain / Loss Ratio) over the long-term.

 

See our Strategy Summary Sheet for more details on our strategies.

Swing Strategies

Swing trading strategy (holds positions overnight).  Primarily systematic, but may use discretion from time-to-time.  Trades XIV, VXX, and Cash based on the Roll-Yield and VRP.

Systematic swing trading strategy (holds positions overnight).  Trades XIV, VXX, and Cash based on the Roll-Yield and VRP.  Strategically scales in and out of drawdowns in XIV.

Systematic swing trading strategy (holds positions overnight).  Only trades ZIV and Cash based on the Roll-Yield and VRP.  Gains exposure to the mid-term VIX futures (rather than the front-end).

Intraday Strategies

Systematic intraday trading strategy.  Only trades XIV and Cash based on the slope of the VIX futures curve.  Strategically alters exposure to manage drawdowns.  May use intraday leverage up to 2x.

Systematic intraday trading strategy.  Trades XIV and VXX based on the slope of the VIX futures curve.  Strategically alters exposure to manage drawdowns.  May use intraday leverage up to 1.5x.

Systematic intraday trading strategy.  Trades XIV and VXX based on the slope of the VIX futures curve.  Strategically alters exposure to manage drawdowns.  Does not use leverage.

Diversified Approach

All of our strategies have their own strengths and weaknesses, and outperform/underperform across various market environments.  In turn, diversifying across our volatility strategies (rather than relying on a single strategy) may help reduce drawdowns and increase risk adjusted performance. Further, sticking to a volatility strategy during drawdowns is arguably the most difficult aspect of trading volatility.  Diversifying with multiple volatility strategies that have different strengths/weaknesses across various markets, may make it easier to stick to the strategies over the long-term, giving you a significant edge.

A portfolio diversified evenly (1/3) across our Tactical Volatility Pro, ZIV Swing Trader, and XIV Yield Trader strategies (rebalanced monthly).

**Past Performance is no guarantee of future results.**
See our Disclaimer.
See the assumptions of our backtest here.