The VIX trading portfolio took on the chin last week, as the resolution(?) of the fiscal cliff issues, at least in traders minds, sent the market soaring. For the week, the portfolio 440 basis points in value and lost a full 900 basis points relative to the market's return. The chart blow shows this loss, with the blue line showing the portfolio relative to the green line (S&P 500) and the brown line (NASDAQ).
You would imagine the performance of the portfolio since inception and since 12/31/12 is just as bad, -4.6% and -2.9%, respectively. Come Monday morning, I will be making some changes to the portfolio and instituting a set of revised trading rules. First, the trading system has tripped the buy rule, as the weighted average standardized VIX remains within the set ranges, but the daily standard VIX is now less than -1.45. Second and to facilitate greater exposure to the market, I will institute a revised set of trading rules. I will continue to use the short S&P 500 ETF for short exposure, but will now implement a passive strategy in periods where there are no signals. For the passive strategy, I will use the S&P 500 ETF, ticker SPY. Lastly and during buy signals, I will use the 2x S&P 500 ETF. The historic model using this strategy vs. the S&P 500 is shown below.
You would imagine the performance of the portfolio since inception and since 12/31/12 is just as bad, -4.6% and -2.9%, respectively. Come Monday morning, I will be making some changes to the portfolio and instituting a set of revised trading rules. First, the trading system has tripped the buy rule, as the weighted average standardized VIX remains within the set ranges, but the daily standard VIX is now less than -1.45. Second and to facilitate greater exposure to the market, I will institute a revised set of trading rules. I will continue to use the short S&P 500 ETF for short exposure, but will now implement a passive strategy in periods where there are no signals. For the passive strategy, I will use the S&P 500 ETF, ticker SPY. Lastly and during buy signals, I will use the 2x S&P 500 ETF. The historic model using this strategy vs. the S&P 500 is shown below.
No comments:
Post a Comment