Hi people,
Simple volatility trading strategy employing the following rules
1. volatility risk premium (VRP) = implied volatility (VIX) - historical volatility
2. Forecast next day volatility using GARCH
3. volatility up (volUp) = GARCH (t+1) - VIX(t)
4. VRP < 0 and volUp > 0 -> buy VXX
5. VRP >0 and volUp buy XIV (harvest the velocity risk premium)
2015 and 2016 period, the return is relatively flat.
Any comment is welcome