In the latest week, the VIX trading portfolio lost 40 basis points in value relative to the market, a loss of 10 basis points versus the 33 basis point gain on the S&P 500. The relative loss occurred earlier this week when the portfolio exposure was reduced a one-for-one market exposure, down from a double market exposure previously.
Year-to-date, the portfolio has gained 4.5% or a loss of 200 basis points relative to the market. Since inception, the portfolio is up 2.6% for a relative loss of about 500 basis points. Currently, the VIX data is providing 'interesting' signals with an emphasis on interesting. The weighted average standardized VIX is currently -2.5. This severity has been seldomly observed since January 2000. In fact, the severe measure has only been observed in only 16 days out of 3,200+ daily observances. Additionally, previous observances cluster around the April 2003 market bottom. This makes inferences about future performance from past observational studies a moot point. The the daily standardized VIX (which is highly volatile and thus noisy) is presently -1.45. Future average and median market performance following similar daily standardized VIX measures shows performance that is better than the typical observation. However, the batting average is only inline with the markets. To me this means, that the future performance may be stronger but that your odds are no better than the market's typical odds. This leads me to stay with the plain vanilla market exposure at this juncture.
Year-to-date, the portfolio has gained 4.5% or a loss of 200 basis points relative to the market. Since inception, the portfolio is up 2.6% for a relative loss of about 500 basis points. Currently, the VIX data is providing 'interesting' signals with an emphasis on interesting. The weighted average standardized VIX is currently -2.5. This severity has been seldomly observed since January 2000. In fact, the severe measure has only been observed in only 16 days out of 3,200+ daily observances. Additionally, previous observances cluster around the April 2003 market bottom. This makes inferences about future performance from past observational studies a moot point. The the daily standardized VIX (which is highly volatile and thus noisy) is presently -1.45. Future average and median market performance following similar daily standardized VIX measures shows performance that is better than the typical observation. However, the batting average is only inline with the markets. To me this means, that the future performance may be stronger but that your odds are no better than the market's typical odds. This leads me to stay with the plain vanilla market exposure at this juncture.
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