This VIX system is designed for timing both long and short trades in the VIX futures, VIX options or buying / selling volatility in the S&P index or stocks. And most importantly as an indicator to time the direction of the S&P This model gets long or short based on a proprietary quantitative algorithm. You will notice from the performance report that this system trades about 40 times a year, the average trade lasts 4.8 days. This system is invested in the VIX roughly 3/4 of the year and the average annual return has been 259% the Maximum peak to trough drawdown is -82%. The average trade predicts a 3.8% move in the index, wining trades have averaged 8.6% and losing trades have declined on average -5.9%. The worst year was a positive 53% return in 1992 and the best year was a positive 1,115.59% return in 1998.This system would have turned a $100 account into $3,247,463,646,035 without using any leverage. The system entry’s are market on close and exits will be based on an opposite signal, time based or a progressive profit taking mechanism, all next day orders will be emailed out the night before and posted to the website.
Below is a hypothetical equity curve of trading our VIX model using the VXZ for longs and VXX for shorts. This model would have turned $1,000 into $4,345 which is a 103% annualized return. All entry and exit signals were made public up until February 24th, you can see the list of trades here.
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The performance report is based on trading 1 share of the VIX index, click to enlarge.
Subscribe to RipeTrade, details here!The equity curve is based on trading 1 share of the VIX index, click to enlarge.
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11 comments:
Sure timing the VIX is easy but trading it is much more difficult. Tradeable instruments based on the VIX (like VIX futures) usually price in much of the mean reversion already.
Very true.I havent traded the VIX futures yet, but have noticed that the timing signals would have captured ~85% of the move in futures relative to cash VIX.
I'm confused. You seem to be implying you can trade the cash VIX to take advantage of this strategy. My understanding is there is only VIX futures and VIX options.
John,
No, Im implying that you can use the historical data on the cash VIX to try and predict moves in the futures or options. Take a look at some short term peaks and troughs in cash and compare the price moves as a percent to the corresponding peaks and troughs in the futures. And don’t forget the S&P is about -80% negatively correlated to the VIX, so if we can predict the VIX we get an edge on S&P.
You clearly don't understant the VIX options and futures - this is ridiculous. I do trade the VIX options and futures and they work nothing like the spot VIX.
Topher,
Please enlighten us then, how do they work??? I just did a follow up post to further explain here http://ripetrade.blogspot.com/2008/12/vix-model-follow-up.html
Any plans to share the trading rules?
Alex,
Sorry, I have to keep the rules proprietary. I will share the entry and exit signals though.
What kind of system trading software do you use? It appears not to be Tradestation 2000i...
Kevin
Kevin,
We use genesis trade navigator.
If we don't do options or futures, can we trade this with the VXX etf?
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