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for the VolaLovers: TradingTheOdds vxx-xiv strategy
Peter Bakker
posted Jul 9, 2015
Show Q ETFs Risk Management

I implemented a brute force vxx-xiv strategy of the blog TradingTheOdds ( http://www.tradingtheodds.com/2014/10/volatility-risk-premium-trading-volatility-part-i/ , http://www.tradingtheodds.com/2014/10/volatility-risk-premium-trading-volatility-part-ii/, http://www.tradingtheodds.com/2014/10/volatility-risk-premium-trading-volatility-part-iii/ ), more as an exercise then anything else. However if we can remove some of the downside, add a hedge , it might hold for the contest. Although I would argue the the VXX is in fact a 3.4 hedge on the SPY so we might not want to hedge with SPY as it would exacerbate the effect when it goes wrong....

Anyway, I just love the vix and I'm convinced a viable strategy is doable ... this one is not good for the ulcers and heart-attack prone users

Peter

7 responses
Simon Thornington
Jul 9, 2015

Awesome, this is my cup of tea! I hope to find something which doesn't require intraday VIX complex indices so it can be run on Quantopian.

Florian Vogt
Aug 30, 2015

this is really very interesting. I am trying to find where in the code you have the smoothing average lookback? In the Brute force this is set to 8 days.

Peter Bakker
Aug 30, 2015

I use other values as that worked better... its brute force ;)

Drew Saltarelli
Sep 1, 2015

Peter, very interesting strategy. Can you explain more how you decided on a starting beta of 1.6? How do results vary with the length of the average lookback?

Florian Vogt
Nov 22, 2015

Has anyone worked out what kind of smoothing average is in this algorythm?

It is using the 2 day vol of spy, but what about the moving average?

Maxim Girbu
Nov 23, 2015

tradingtheodds is trading the similar strategy and it's been underperforming just buy and hold xiv... http://www.tradingtheodds.com/portfolio/

Lake Austin
Aug 6, 2016

set the high fee of xiv aside, it's actually nice to buy and hold xiv using trend following

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