Svxy january2016options begin trading

Svxy january2016options begin tradingSVXY January 2016 Options Begin Trading

Investors in Proshares Short VIX Short-Term Futures ETF (SVXY ) saw new options become available today, for the January 2016 expiration. One of the key inputs that goes into the price an option buyer is willing to pay, is the time value, so with 795 days until expiration the newly available contracts represent a potential opportunity for sellers of puts or calls to achieve a higher premium than would be available for the contracts with a closer expiration. At Stock Options Channel. our YieldBoost formula has looked up and down the SVXY options chain for the new January 2016 contracts and identified one put and one call contract of particular interest.

The put contract at the $119.00 strike price has a current bid of $43.10. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $119.00, but will also collect the premium, putting the cost basis of the shares at $75.90 (before broker commissions). To an investor already interested in purchasing shares of SVXY, that could represent an attractive alternative to paying $119.95/share today.

Because the $119.00 strike represents an approximate 1% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 69%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 36.22% return on the cash commitment, or 16.63% annualized — at Stock Options Channel we call this the YieldBoost .

Below is a chart showing the trailing twelve month trading history for Proshares Short VIX Short-Term Futures ETF, and highlighting in green where the $119.00 strike is located relative to that history:

Posts tagged-xiv

Posts tagged-xivUpdate on Last Week’s SVXY Volatility Trade

Friday, September 4th, 2015

Last week I suggested buying two calendar spreads on the inverse volatility ETP called SVXY. At the time, it was trading at $58 and history showed it was highly likely to move higher in the short run. It didn’t. Instead, it has fallen to below $46 today. Anyone who followed this trade (as I did) is facing about a 75% loss right now.

Today I would like to discuss this trade a bit more, and tell you what I am doing about it.

Update on Last Week’s SVXY Volatility Trade

As I said last week, the market is going crazy. VIX, the so-called Fear Index, skyrocketed to 40 last week, something it hasn’t done for over 2 years. It has fallen to about 28 today, and if history is any indicator, it is headed for the 12 – 14 level where it has hung out for the large part of the past two years.

Here is the two-year chart of VIX so you can get an idea of how unusual the current high level of volatility is:

XIV Chart September 2015

Note that about 90% of the time, VIX is well below 20. When it moves higher than that number, it is only for a short period of time. Every excursion over 20 is quickly reversed.

There is a strong correlation between the value of VIX and the price changes in SVXY.

When VIX is low (or falling), SVXY almost always moves higher. When VIX shoots higher (or stays higher), SVXY will fall. Over the past month, SVXY has fallen from the low $90’s to about half of that today. Never in the 7-year history of this ETP has it fallen by such a whopping amount.

SVXY is constructed by trading on the futures of VIX. Each day, the ETP purchases at the spot price of VIX and sells the one-month-out futures. Since about 90% of the time, the futures price is greater than the spot price (a condition called contango), SVXY gains slightly in value. The average contango number is about 5%, and that is how much SVXY is expected to gain in those months.

Every once in a while (less than 10% of the time), current uneasiness is so high (like it is today), VIX is higher than the futures values. When this occurs, it is called backwardation (as opposed to contango). Right now, we have backwardation of about -8%. If this continued for a month, SVXY might be expected to fall by that amount.

However, backwardation is not the dominant condition for very long. It rarely lasts as long as a week. It is highly likely that contango will return, VIX will fall back below 20, and SVXY will recover.

Let’s review the trades I made last week:

Buy To Open 1 SVXY Oct1-15 60 call (SVXY151002C60)

Sell To Open 1 SVXY Sep1-15 60 call (SVXY150904C60) for a debit of $3.35 (buying a calendar)

Buy To Open 1 SVXY Oct1-15 65 call (SVXY151002C65)

Sell To Open 1 SVXY Sep1-15 65 call (SVXY150904C65) for a debit of $3.30 (buying a calendar)

For every two spreads I bought, I shelled out $665 plus $5 in commissions, or $670.

Here is what the risk profile graph says these positions will be worth at the close in 10 days when the short calls expire next Friday:

SVXY Risk Profile Graph September 2015

The chart shows that if the stock fell below $46 (as it has today), the spreads will lose nearly $500 of the $670 cost. That is just about what has happened. In fact, implied volatility (IV) of the SVXY options has fallen from about 100 to about 90 which means the value of the Oct1-15 calls has also fallen a bit that the above graph indicates. The 60 spread could be sold right now for about $1.20 and the 65 spread would get only about $.65. That works out to a loss of about $480 on a $670 investment (about 75% after commissions).

While a 75% loss is just awful, remember that we expected to make 90% on these spreads if the stock had ended up between $60 and $67 as we expected it would (and we would presumably have rolled the Sep1-15 expiring calls to future weekly series and increased our gain to well over 100%.

Every once in a while, the market does exactly the opposite of what you expected (or what historic experience would predict). This is one of those times. Fortunately, they occur in far less than 50% of the time. If you made this same bet on a number of occasions, over the long run, you should make excellent gains.

This time, you either have a choice of closing out the spreads or doing nothing, just hanging on (waiting for a resurgence of SVXY and being able to sell the remaining Oct1-15 calls at a higher price). If you do sell the spread rather than letting the short Sep1-15 calls expire worthless today, be sure to use a limit order. Most of the time, you should be able to get a price which is just slightly below the mid-point of the quoted spread price. Options on SVXY carry wide bid-ask ranges, but spreads are usually possible to execute near the mid-point of the quoted prices.

I plan to do nothing today. Even if I decide to sell Sep2-15 or Sep-15 calls against my long Oct1-15 positions, I will do it later (once SVXY has moved higher, as it should when the market settles down and VIX falls back to where it usually hangs out).

The spreads I suggested making a week ago have proved to be extremely unprofitable (at least so far). But taking losses is a necessary part of option trading. There are often big losses, but big gains are also possible (and oftentimes, probable).

Vix and more

Vix and moreThursday, April 12, 2012

Buying SVXY Calls when the VIX Spikes

Based upon some of the emails I have received this week, it appears that a number of readers have been focused on buying some of the inverse VIX ETPs. notably XIV and SVXY. when they saw the VIX spike. Some have preferred shorting VXX. TVIX and UVXY. based partly on availability, while others have preferred to trade VXX options, generally by buying puts or limiting risk with the likes of a bear call spread .

I had thought that my recent Options on UVXY and SVXY Open Up New VIX ETP Trading Approaches might nudge some traders into considering strategies involving the +2x leveraged long VIX short-term futures ETF (UVXY) and perhaps utilize the -1x short VIX short-term futures ETF (SVXY) as well, but based on the volumes, these issues are still in the process of gaining a broader audience. In fact, UVXY did see record call volume of 7300 contracts on Tuesday, but SVXY has been the laggard so far, as the graphic below illustrates.

So here is a thought: the next time the VIX has a significant spike, one of the first trades you should investigate is fading that spike by buying SVXY out-of-the-money calls. This is a simple trade and has the potential to be quite profitable. The SVXY April 90 calls, for instance, have jumped 40% from Tuesdays close.

The exciting news about options on SVXY and UVXY is that traders can now easily structure a broad variety of trades that involve defined risk and substantial upside. While VXX (and VIX) options are still the gold standard in terms of liquidity, SVXY and UVXY options also deserve some love even if the spreads are still wider than those of VXX.

Related posts:

[source(s): LivevolPro]

Disclosure(s ): long XIV and SVXY, short VXX, TVIX and UVXY at time of writing; Livevol is an advertiser on VIX and More

Tuesday, March 27, 2012

Options on UVXY and SVXY Open Up New VIX ETP Trading Approaches

Whether or not I find it useful to flog the wounded horse otherwise known as the VelocityShares Daily 2x VIX Short-Term ETN (TVIX ), it seems as if investors and the media insist that the wild and crazy story of this +2x VIX futures ETN remain on the front page for now.

While the TVIX story is indeed a fascinating one (see links below for more details), I fear it has crowded out a potentially more useful development from last week that has been criminally overlooked, the launch of options on two important VIX ETFs :

ProShares Ultra VIX Short-Term Futures ETF (UVXY )

ProShares Short VIX Short-Term Futures ETF (SVXY )

First off, note that the fact that these two products are exchange-traded funds instead of exchanged-traded notes means that it was much easier for options to be approved. While their more famous ETN counterparts, TVIX and XIV. grab most of the headlines, the addition of options means that traders now have much more flexibility in terms of strategy and tactics with UVXY and SVXY

In the past when I have mentioned how options on VIX ETPs were critical to their long-term success, I was met with a few (electronic) blank stares. Part of this reflects that fact that many have been drawn to the VIX ETPs for the potential to reap huge profits in a short period of time (more on this in The Trader Development Stage Model and the Jump from Stocks to Options ) with leveraged trades. Talk to most professional options traders, however, and leverage is rarely a factor they mention as a reason for their focus on options trading. In fact, pros are more likely to cite the two key advantages of options as their flexibility and ability to structure defined risk (or limited risk) trades.

This brings me back to options on UVXY and SVXY. With UVXY down 83% for the quarter as of yesterdays close, one would think that defined risk positions on the long or short side would be a critical factor in structuring future trades. With the huge contango and negative roll yield currently in the VIX futures, a directional bet in either direction entails huge risk. For shorts, this means that a short position can have its risk capped by buying UVXY calls. For longs this means that a long position can also limit risk by buying puts.

There are other ways to implement defined risk trades, notably with vertical credit spreads and vertical debit spreads. where gains and losses are limited to the distance between strikes. Traders can also just simply buy puts and calls to put a directional idea to work, knowing that their maximum loss will be limited to the purchase price.

In hard to borrow situations which are common with some VIX ETPs traders can also use options to create a synthetic position. For instance, a long put plus a short call is the equivalent of a synthetic short, so if no shares are available to borrow, a synthetic position might be an excellent proxy, with the same profit and loss potential as a standard short position, yet typically tying up a lot less trading capital.

Note that the markets for options in UVXY and SVXY are only one week old and not particularly liquid at this stage. On the other hand, volumes are ramping up quickly (see graphic of UVXY options volume, etc. below) and the flexibility and risk control inherent in options products makes these attractive, particularly so when applied to highly volatile products like UVXY and SVXY.

Related posts:

[source(s): LivevolPro]

Disclosure(s ): long XIV and SVXY, short TVIX and UVXY at time of writing; Livevol is an advertiser on VIX and More

Monday, August 17, 2009

How to Trade the VIX

Based upon the search terms that are landing visitors on the blog this morning, it seems as if many readers are interested in how to trade the VIX. This question really boils down to two separate issues: strategies and trading vehicles.

Since I have talked about strategies repeatedly in this space in the past, I thought I would offer a quick summary of trading vehicles today.

First off, it is not possible to trade the VIX directly. Formally known as the CBOE Volatility Index, the VIX calculates market expectations of 30 day implied volatility for SP 500 index options. The VIX (sometimes referred to as the cash or spot VIX) is a statistic that the CBOE calculates and disseminates every 15 seconds during the trading day. While widely disseminated, this statistic is not available for purchase.

Fortunately, there are a number of VIX derivatives that allow traders to take positions on the VIX without owning the underlying. In no particular order, they are:

VIX options these include standard options as well as VIX binary options

VIX futures standard VIX futures contracts have a contract size of 1000 times the VIX; the recently added mini-VIX futures have a contract size of 100 times the VIX

VIX ETNs currently consists of two exchange traded notes: the iPath SP 500 VIX Short-Term Futures ETN (VXX ) and the iPath SP 500 VIX Mid-Term Futures ETN (VXZ ). The former targets one month VIX futures and the latter targets five month VIX futures.

In addition to VIX products, one can always trade options on the SPX (or SPY). A long VIX position is very similar to a long SPX straddle (or strangle ); a short VIX position is very similar to a short SPX straddle (or strangle.)

For some additional reading on these subjects, readers are encouraged to check out:

Vxx xiv trading strategy at home business courses ny stock market prices

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Archive for the-vxx-category

Archive for the-vxx-categoryArchive for the VXX Category

The Worst “Stock” You Could Have Owned for the Last 6 Years

Monday, September 14th, 2015

Today I would like to tell you all about the worst “stock” you could have owned for the past 6 years. It has fallen from $6400 to $26 today. I will also tell you how you can take advantage of an unusual current market condition and make an options trade which should make a profit of 66% in the next 6 months. That works out to an annualized gain of 132%. Not bad by any standards. For the next few days, I am also offering you the lowest price ever to become a Terry’s Tips Insider and get a 14-day options tutorial which could forever change your future investment results. It is a half-price back-to-school offer – our complete package for only $39.95. Click here, enter Special Code BTS (or BTSP for Premium Service $79.95).

This could be the best investment decision you ever make – an investment in yourself.

Happy trading.

The Worst “Stock” You Could Have Owned for the Last 6 Years

I have put the word “stock” in quotations because it really isn’t a stock in the normal sense of the word. Rather, it is an Exchange Traded Product (ETP) created by Barclay’s which involves buying and selling futures on VIX (the so-called “Fear Index” which measures option volatility on the SP 500 tracking stock, SPY). It is a derivative of a derivative of a derivative which almost no one fully understands, apparently even the Nobel Prize winners who carried out Long-Term Capital a few years back.

Even though it is pure gobbledygook for most of us, this ETP trades just like a stock. You can buy it and hope it goes up or sell it short and hope it goes down. Best of all, for options nuts like me, you can trade options on it.

Let’s check out the 6-year record for this ETP (that time period is its entire life):

VXX Historical Chart 2015

It is a little difficult to see what this ETP was trading at when it opened for business on January 30, 2009, but its split-adjusted price seems to be over $6000. (Actually, it’s $6400, exactly what you get by starting at $100 and engineering 3 1-for-4 reverse splits). Friday, it closed at $26.04. That has to be the dog of all dog instruments that you could possible buy over that time period (if you know of a worse one, please let me know).

This ETP started trading on 1/30/09 at $100. Less than 2 years later, on 11/19/10, it had fallen to about $12.50, so Barclays engineered a reverse 1-for-4 split which pushed the price back up to about $50. It then steadily fell in value for another 2 years until it got to about $9 on 10/15/12 and Barclays did the same thing again, temporarily pushing the stock back up to $36. That lasted only 13 months when they had to do it again on 11/18/13 – this time, the stock had fallen to $12.50 once again, and after the reverse split, was trading about $50. Since then, it has done relatively better, only falling in about half over almost a two-year span.

Obviously, this “stock” would have been a great thing to sell short just about any time over the 6-year period (if you were willing to hang on for the long run). There are some problems with selling it short, however. Many brokers can’t find stock to borrow to cover it, so they can’t take the order. And if they do, they charge you some healthy interest for borrowing the stock (I don’t quite understand how they can charge you interest because you have the cash in your account, but they do anyway – I guess it’s a rental fee for borrowing the stock, not truly an interest charge).

Buying puts on it might have been a good idea in many of the months, but put prices are quite expensive because the market expects the “stock” to go down, and it will have to fall quite a way just to cover the cost of the put. I typically don’t like to buy puts or calls all by themselves (about 80% of options people buy are said to expire worthless). If you straight-out buy puts or calls, every day the underlying stock or ETP stays flat, you lose money. That doesn’t sound like a great deal to me. I do like to buy and sell both puts and calls as part of a spread, however. That is another story altogether.

So what else should you know about this ETP? First, it is called VXX. You can find a host of articles written about it (check out Seeking Alpha) which say it is the best thing to buy (for the short term) if you want protection against a market crash. While that might be true, are you really smart enough to find a spot on the 6-year chart when you could have bought it and then figured out the perfect time to sell as well? The great majority of times you would have made your purchase, you would have surely regretted it (unless you were extremely lucky in picking the right day both to buy and sell).

One of the rare times when it would have been a good idea to buy VXX was on August 10, 2015, just over a month ago. It closed at its all-time low on that day, $15.54. If you were smart enough to sell it on September 1st when it closed at $30.76, you could have almost doubled your money. But you have already missed out if you didn’t pull the trigger on that exact day. It has now fallen over 15% in the last two weeks, continuing its long-term trend.

While we can’t get into the precise specifics of how VXX is valued in the market, we can explain roughly how it is constructed. Each day, Barclays buys one-month-out futures on VIX in hopes that the market fears will grow and VIX will move higher. Every day, Barclays sells VIX futures it bought a month ago at the current spot price of VIX. If VIX had moved higher than the month-ago futures price, a profit is made.

The reason why VXX is destined to move lower over time is that over 90% of the time, the price of VIX futures is higher than the spot price of VIX. It is a condition called contango. The average level of contango for VIX is about 5%. That percentage is how much higher the one-month futures are than the current value of VIX, and is a rough approximation of how much VXX should fall each month.

However, every once in a while, the market gets very worried, and contango disappears. The last month has been one of those times. People seem to be concerned that China and the rest of the world is coming on hard times, and our stock markets will be rocked because the Fed is about to raise interest rates. The stock market has taken a big tumble and market volatility has soared. This has caused the current value of VIX to become about 23.8 while the one-month futures of VIX are 22.9. When the futures are less than the spot price of VIX, it is a condition called back-wardation. It only occurs about 10% of the time. Right now, backwardation is in effect, (-3.59%), and it has been for about 3 weeks. This is an exceptionally long time for backwardation to continue to exist.

At some point, investors will come to the realization that the financial world is not about to implode, and that things will pretty much chug along as they have in the past. When that happens, market volatility will fall back to historical levels. For most of the past two or three years, VIX has traded in the 12 – 14 range, about half of where it is right now. When fears subside, as they inevitably will, VIX will fall, the futures will be greater than the current price of VIX, and contango will return. Even more significant, when VIX falls to 12 or 14 and Barclays is selling (for VXX) at that price, VXX will lose out big-time because a month ago, it bought futures at 22.9. So VXX will inevitably continue its downward trend.

So how can you make money on VXX with options? To my way of thinking, today’s situation is a great buying opportunity. I think it is highly likely that volatility (VIX) will not remain at today’s high level much longer. When it falls, VXX will tumble, contango will return, and VXX will face new headwinds going forward once again.

Here is a trade I recommended to Terry’s Tips Insiders last Friday:

“If you believe (as I do) that the overwhelming odds are that VXX will be much lower in 6 months than it is now, you might consider buying a Mar-16 26 call (at the money – VXX closed at $26.04 yesteday) and sell a Mar-16 21 call. You could collect about $2 for this credit spread. In 6 months, if VXX is at any price below $21, both calls would expire worthless and you would enjoy a gain of 66% on your $3 at risk. It seems like a pretty good bet to me.”

This spread is called selling a bearish call credit vertical spread. For each spread you sell, $200 gets put in your account. Your broker will charge you a maintenance requirement of $500 to protect against your maximum loss if VXX closes above $26 on March 18, 2016. Since you collect $200 at the beginning, your actual maximum loss is $300 (this is also your net investment in this spread). There is no interest charged on a maintenance requirement; rather, it is just money in your account that you can’t use to buy other stocks or options.

This may all seem a little confusing if you aren’t up to speed on options trading. Don’t feel like the Lone Ranger the great majority of investors know little or nothing about options. You can fix that by going back to school and taking the 14-day options tutorial that comes with buying the full Terry’s Tips’ package at the lowest price ever – only $39.95 if you buy before Friday, September 23, 2015.

Lowest Subscription Price Ever: As a back-to-school special, we are offering the lowest subscription price than we have ever offered – our full package, including all the free reports, my White Paper, which explains my favorite option strategies in detail, and shows you exactly how to carry them out on your own, a 14-day options tutorial program which will give you a solid background on option trading, and two months of our weekly newsletter full of tradable option ideas. All this for a one-time fee of $39.95, less than half the cost of the White Paper alone ($79.95).

For this lowest-price-ever $39.95 offer, click here, enter Special Code BTS (or BTSP for Premium Service $79.95).

A Low-Risk Trade to Make 62% in 4 Months

Tuesday, September 8th, 2015

Market volatility continues to be high, and the one thing we know from history is that while volatility spikes are quite common, markets eventually settle down. After enduring a certain amount of psychic pain, investors remember that that the world will probably continue to move along pretty much as it has in the past, and market fears will subside. While this temporary period of high volatility continues to exist, there are some trades to be made that promise extremely high returns in the next few months. I would like to discuss one today, a trade I just executed in my own personal account so I know it is possible to place.

A Low-Risk Trade to Make 62% in 4 Months

As we have been discussing for several weeks, VIX, the so-called Fear Index, continues to be over 25. This compares to the 12 – 14 level where it has hung out for the large part of the past two years. When VIX eventually falls, one thing we know is that SVXY, the ETP that moves in the opposite direction as VIX, will move higher.

Because of the persistence of contango, SVXY is destined to move higher even if VIX stays flat. Let’s check out the 5-year chart of this interesting ETP:

5 Year Chart SVXY September 2015

Note that while the general trend for SVXY is to the upside, every once in a while it takes a big drop. But the big drops don’t last very long. The stock recovers quickly once fears subside. The recent drop is by far the largest one in the history of SVXY.

As I write this, SVXY is trading about $47, up $2 ? for the day. I believe it is destined to move quite a bit higher, and soon. But with the trade I made today, a 62% profit (after commissions) can be made in the next 4 months even if the stock were to fall by $7 (almost 15%) from where it is today.

This is what I did:

Buy to Open 1 SVXY Jan-16 35 put (SVXY160115P35)

Sell to Open 1 SVXY Jan-16 40 put (SVXY160115P40) for a credit of $1.95 (selling a vertical)

When this trade was executed, $192.50 (after a $2.50 commission) went into my account. If on January 15, 2016, SVXY is at any price higher than $40, both of these puts will expire worthless, and for every vertical spread I sold, I won’t have to make a closing trade, and I will make a profit of exactly $192.50.

So how much do I have to put up to place this trade? The broker looks at these positions and calculates that the maximum loss that could occur on them would be $500 ($100 for every dollar of stock price below $40). For that to happen, SVXY would have to close below $35 on January 15th. Since I am quite certain that it is headed higher, not lower, a drop of this magnitude seems highly unlikely to me.

The broker will place a $500 maintenance requirement on my account. This is not a loan where interest is charged, but merely cash I can’t use to buy shares of stock. However, since I have collected $192.50, I can’t lose the entire $500. My maximum loss is the difference between the maintenance requirement and what I collected, or $307.50.

If SVXY closes at any price above $40 on January 15, both puts will expire worthless and the maintenance requirement disappears. I don’t have to do anything except think of how I will spend my profit of $192.50. I will have made 62% on my investment. Where else can you make this kind of return for as little risk as this trade entails?

Of course, as with all investments, you should only risk what you can afford to lose. But I believe the likelihood of losing on this investment is extremely low. The stock is destined to move higher, not lower, as soon as the current turbulent market settles down.

If you wanted to take a little more risk, you might buy the 45 put and sell a 50 put in the Jan-15 series. You would be betting that the stock manages to move a little higher over the next 4 months. You could collect about $260 per spread and your risk would be $240. If SVXY closed any higher than $50 (which history says that it should), your profit would be greater than 100%. I have also placed this spread trade in my personal account (and my charitable trust account as well).

Trading strategies using svxy

Trading strategies using svxyTrading Strategies To Protect Wealth In A Market Correction

May. 28, 2014 6:13 AM

Stock prices are at an all-time high, while the VIX is at a multi-year low.

It may be a good time to protect your portfolio using options because option prices are low.

An simple options strategy to protect wealth from a market correction is presented.

There's no denying it. Depending on which talking head you are listening to, the market is either fully valued or in mild bubble territory. The stock market, as measured by the ETF SPY reached an all-time high today. So what's a reasonable investor to do to protect a portfolio from a possible market correction? I suggest using options to hedge risk and to move away from a linear risk/reward profile. When you own stocks, your profit or loss depends on the change in the stock price and the payoff is perfectly linear.

How Options Help

Options give you the ability to change the shape of the payoff profile, which can result in lots of fun shapes in complex option strategies. For this article we will only concern ourselves with the most basic option strategy, which has a payoff that looks like a hockey stick. Here's a simple chart to show how adding a long put to your long stock position changes the shape of the payoff diagram.

The simplest way to hedge your long stock while still staying invested is to buy put options. Option prices are currently super cheap, with the VIX hovering just below 12. The VIX doesn't get this low very often. Buying put options is conceptually similar to buying insurance. You pay a small amount upfront to buy protection from a bad outcome. If a bad outcome does happen, you will be glad you bought the insurance. On the other hand, if a bad outcome does not happen (if stocks rise or go sideways), you wound up buying insurance you did not really need. But you will still sleep soundly, because you know you are protected. As with car insurance, or homeowners insurance, it's usually hard to tell if you need it beforehand. However, unlike other types of insurance, the cost of protection for your stock portfolio varies over time significantly. The below chart shows the VIX index, which represents cost of buying insurance on the SP 500 index. A lower VIX means option prices are low. Right now we are at the lowest level in more than a year.

The traditional thinking is that the market is telling us that it is not worried about a correction. On the other hand, this could also be a sign of too much complacency on Wall St. Since the VIX tends to be backward looking, I'd take the view that low option prices won't necessarily translate into stable stock prices going forward. Instead, it simply means that we haven't had any large moves over the last few weeks, and this has depressed option prices. Any way you want to look at it, I think option prices are cheap, and buying some protection right now seems prudent to me given the level of stock prices.

BTW, you don't have to use put options. If you don't feel up to trading options, there are still several ways to trade volatility using ETFs. Buying VXX. VIXY. TVIX. or UVXY provides a hedge similar to what could be accomplished by buying put options. You will get a big payoff if stocks fall. Inverse ETFs provide access to a similar strategy that you can employ by selling XIV or SVXY. You could also buy VIX futures directly if you have deep pockets.

Disclosure: I am short VXX and long SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Publiziert 13. September 2015 | Von

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Volatility Trading Made Simple And Profitable

[Updated on 12/11/13 at 4:48pm PT]

Last week we added a new chart to the VIX Futures Data page which plots the daily closing value of the VXX Weekly Roll Yield, WRY, against its 10-day simple moving average.

This new chart provides traders with simple entry and exit signals that can be used to measure the momentum of VXX, UVXY, XIV, and SVXY.

2) being long VXX/UVXY (or short XIV) whenever the WRY is above its moving average.

Below is the current chart.

SVXY Strategy: Part 2

This post discusses a path dependent model to make large returns with SVXY call options. Its assumed you are familiar with option trading and volatility funds.

SVXY, unlike XIV, has a complete option chain going as far as Jan 2016. For the first part of this post, we will focus only on the furthest in-the-money Jan 2016 $28 call option, highlighted in yellow:

This option expires in approximately 15 months and has $5 of extrinsic value and a delta of .86.

Heres a proxy for SVXY dating as far back as 2004 (it doesnt go any further back). As you can see, it periodically rises and falls between 50-100%:

To double or quadruple your money you need to capture one of these upturns.

Heres a historical chart of the VIX dating back to 1995:

As indicated by the circles and lines, there have been seven spikes above 40 and many more in the 30′s.

Putting the two charts together we see a pattern:

A VIX spike to 30 causes SVXY to fall in half.

A spike from 45-55 causes it fall in half again, a total loss of 75%.

A super-spike, such as in 2008, results in a 88% or more drop. There have only been two super-spikes in recent history, which was in 1987 and 2008. So these are very rare.

So time to create an investment strategy to capture upside from SVXY and protect, and even profit, from downside.

Lets assume you have $50,000 in your account and SVXY has fallen 50% from its recent high (like it has now).

If we want to buy $18,000 worth of SVXY at a present price of $52 using the highlighted call options, you will need 4 contracts at roughly $28 each; this costs about $11,000. This is derived using: 4 (contracts) times 100 times 52 times .86 (delta)

Ok, so now you wait for SVXY to rally, as it typically does after these falls. If within the next 15 months (the duration of the option) it doubles or quadruples, you make profits of $18,000 and $36,0000, respectively. But you have to subtract $2000 (400*5) for the extrinsic value for the contracts.

What if the market crashes some more? Fist, the option will not fall as quickly as the stock; instead it will gain more extrinsic value. So if SVXY falls from $50 to $25, the $28 call may drop to $10, so you only lose $7,000 by being long four call options instead of losing $10,000 if you were long 400 shares. (to get exact numbers requires use of the Black Scholes equation)

If SVXY falls less than 50% from your buy point, ride it out. Unless the market tanks again, it will eventually go higher.

If it falls another 50% (a vix spike above 45), buy another $18,000 worth using $11,000 worth of deep-in-the-money call options, like in the previous step. So if the present price of SVXY is $52 and the peak is $93, we would be looking at a decline to $23-25 (75%). Presumably, you would be able to buy twice as many options, but the quantity doesnt matter provided you keep the extrinsic value to around $2,000, leverage at $18000, time until expiration around 1 year, and the purchase cost to $11,000. Essentially, youre doubling down.

Heres a diagram of how the strategy evolves:

So even with a large market decline, within 21 months you should be able to increase your initial account size by 64%.

But what about the rest of the cash that hasnt been deployed into options?

Lets assume a major crisis like 2008 or 1987 and the VIX spikes above 80, in which SVXY loses 88% of its value and falls to $12 (this is keeping in mind that such events are extremely rare, having only occurred twice in a fifty year time frame). Lets also assume that the first batch of purchased contracts expire worthless and the next phase of the crash takes 9 months, bringing SVXY to $12. The second batch of contracts you purchased are worth $3000 at this stage, bringing your account value down to $31,000. Just buy 2,000 shares or $24,000 worth of SVXY outright (no options), leaving you with $7,000 cash left over. It would not be too unreasonable to assume that within the next 6 months SVXY rebounds to $25. Your $24k becomes $48K. The $18K second batch is worth $16k (taking into account the $2,000 extrinsic value). Adding it up your account balance is $71,000. Not bad for a market crash. The reason why you buy the stock instead of options is because its very unlikely SVXY falls lower, but there is a possibility it wont recover for awhile and you dont want to deal with the possibility of options expiring worthless or losing money due to extrinsic value decay. At such depressed levels, the stock is simply a better value than the options.

Also, volatility has a nice property which is that it typically requires exponential* (second order effect) of downward movement in the stock market to make volatility rise a linear amount, similar to the Richter magnitude scale. So even if the market continues to fall, volatility may not rise anymore, which is what happened in 2009 and 2002. In the 2000-2003 bear market, for example, the VIX spiked to 40 as early as 2001 an never went above it even as the stock market kept falling for another two years. The reason why the vix didnt spike is because the rate of decline of the market was steady. For the vix to really spike, you must have sudden, big drops. Thats why the SVXY doubling down strategy is better than a doubling down strategy with the S&P 500 because with inverse volatility funds you have the logarithmic property of volatility working to your advantage, which limits the potential losses on SVXY even as stocks keep falling. In October 2008 when the S&P 500 plunged 20% in a single week, the hypothetical backtested XIV fund made a low and didnt go much lower despite the S&P 500 falling another 30%.

** In light of recent market events, an update on the strategy.

* Lets assume a stock is falling linearly like y=mx+b. The first derivative is a constant, which means volatility is constant even as the market is falling. If you have a second order decline like y=ax^2, the volatility does rise linearly

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Trading strategies using adx trade stock online canada

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Live updates with charts(most recently alerted stocks)

Live updates with charts(most recently alerted stocks)LIVE Updates with Charts (most recently alerted stocks)

See our Free stocks to watch list for active and/or swing traders below on stocks setting up (poised) that we believe will likely be breaking out soon. Our Free stock picks are updated daily with charts. See more on when to buy and sell these stocks below.

You can also follow our calls (trades posted LIVE in chat) by pro traders, both long and short positions using common shares and/or options.

NUGT - Position Closed +5.6%

UVXY - Position Closed +4.1%

RPD - Position Closed +15.9% +6.1%

ARWR - Position Closed +4.8% +0.0%

SVXY - Position Closed -3.6%

DTEA - Position Closed +5.6%

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Traders are starting to catch on that I do not operate like so many other trade rooms and/or scans put out through email and other systems that put out loads of ticker symbols knowing that at least one or two will run up, just in order to look good!

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Trading volatility abasic vxx strategy

Trading volatility abasic vxx strategyTrading Volatility: A Basic VXX Strategy

The continually evolving ETF and ETN marketplace has made it incredibly easy for the average retail trader to have access to plenty of different markets that used to be reserved for professional traders. With that new availability has come a large influx of strategies and ideas for quantitative approaches to these markets.

The creation of the VXX ETN has provided retail traders the ability to trade market volatility. Traders who used to simply use the VIX as a general market indicator are now able to actually trade that indicator.

The VXX makes trading volatility an option for retail traders. Jay Wolberg gives us a unique idea for a trading strategy.

Jay Wolberg from Trading Volatility published a strategy for trading the VXX based on signals from the VXX Weekly Roll Yield (WRY) and its 10-day simple moving average.

The rules for this idea are extremely simple:

There are two halves of this trading strategy:

1) being short VXX/UVXY (or long XIV/SVXY) whenever the WRY is below its moving average, and

2) being long VXX/UVXY (or short XIV) whenever the WRY is above its moving average.

He provides us with his backtesting parameters:

Ive backtested the strategies separately for short VXX only and long VXX only from the inception of VXX (1/30/2009) through 12/10/2013.

Decision points are made using the days closing data (individual trades in the analysis can be viewed here ).

Jays short side returns look very promising:

For short VXX only:

# of Gains: 59

# of Losses: 47

Avg Return: +4.1%

Max Gain: +40.4%

Max Loss: -19.2%

Sum of Gains Losses: +438.6%

But his long side returns arent profitable:

For long VXX only:

# of Gains: 32

# of Losses: 74

Avg Return: -0.8%

Max Gain: +60.6%

Max Loss: -17.4%

Sum of Gains Losses: -81.9%

As you can see, the short side of this strategy appears to have an edge, but the long side doesnt quite stack up. Jay continues by providing histograms that report the returns of individual trades.

He also suggests that many of the long side trades started out profitable, but then gave back their gains and turned into slight losses. His theory is that implementing a trailing stop would have protected those profits and rendered a successful long side strategy.

In addition to adding trailing stops, I would also be curious to see how adding a long term trend filter would impact the returns. I wonder how many of his losing trades took place on the wrong side of the 100 or 200-day simple moving average.

Once again, we have a strategy that could be developed into something unique and profitable. However, at this point it is basically just an interesting idea.

Rules for trading leveraged etfs

Rules for trading leveraged etfsRules for Trading Leveraged ETFs

If you think the stock market is a volatile place, you ought to get a load of ETFs that use leverage.

From Oct. 10 to Oct. 15, the Direxion Daily SP 500 Bull 3x ETF (NYSEARCA:SPXL) collapsed 10.07%. But from Oct. 15 through today, SPXL soared 13.40%. That’s a breathtaking swing of 23.47% from negative to positive gains in just a matter of two weeks!

These types of performance extremes shouldnt be a shock because leveraged ETFs are designed to do just that: magnify performance. Of course, if you’re on the wrong side of the trade they can also magnify losses.

For example, SPXL is a “bullish fund” and it aims to deliver triple daily performance to the SP 500 (NYSEARCA:IVV). That means if the SP 500 is up 1%, SPXL should theoretically be up 3%. On the other hand, if the SP declines 1%, SPXL will be down 3%.

The chart below plots SPY, SPXL, and SPXS to help you visually understand these not so subtle differences.

SPXS is the “bearish fund” that does the exact opposite of SPXL. In this case, SPXS shoots for triple daily inverse performance to the SP 500.

Leveraged ETFs are often criticized by people within the financial services industry because 1) they don’t understand the products, 2) they don’t understand how and where leverage belongs in portfolio construction, or 3) they have an anti-leveraged ETF bias.

In my video, “3 Rules for Using Leveraged ETFs ,” I talk about the time and place for leverage. Along with this, here are a few more guidelines.

Don’t focus on too many markets

Leveraged ETFs follow a variety of asset classes beyond stocks including bonds (NYSEARCA:TMF), currencies (NYSEARCA:EUO), commodities (NYSEARCA:CMD), real estate (NYSEARCA:DRN), and even volatility (NYSEARCA:SVXY). While it’s nice to have a breadth of choices, simultaneously trading too many markets can become distracting. And distraction often leads to losses.

Leveraged ETFs aren’t long-term investments

If you’re buying a leveraged ETF, understand that you’re making short-term trade, not a long-term investment. Generally, a short-term trade is one that lasts anywhere from one day up to several weeks. If you’re buying a leveraged ETF as a long-term investment, you’re using the tool the wrong way and is comparable to using a screwdriver to do a hammer’s job.

Stick with sharply trending markets

Big performance gains with leveraged ETFs can be had in sharply trending markets. In a bearish market, bear funds that aim for inverse or short performance are likely to excel, whereas in a bull market the bull funds with leverage should be large gainers.

The ETF Profit Strategy Newsletter uses sentiment, history and common sense to keep investors on the right side of the market. All readers get email and text alerts.

Follow us on Twitter ETFguide

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Xiv trading strategies kazakhstan stock exchange kaseXiv trading strategies kazakhstan stock exchange kase

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Xiv trading strategies kazakhstan stock exchange kase 05.22.2015

Xiv trading strategy

Xiv trading strategyA Momentum Rotation Strategy for Trading VIX ETPs

This is a test of a simple rotation strategy detailed in the paper Easy Volatility Investing from Double-Digit Numerics, which uses momentum to trade VIX ETPs .

Below are trading results (blue), compared to buying and holding XIV (grey), from mid-2004 to present.

Strategy rules: The four ETPs traded are XIV. VXX. ZIV. and VXZ. Go long at the close the ETP with the highest return over the last 83-days. If all 83-day returns are negative, move to cash. Hold until a new ETP signals a trade.

As one would expect, due to their bigger, more volatile returns, the strategy spends about 74% of all days in either XIV or VXX, but would have also frequently chosen the mid-term VIX ETNs VXZ (14%) and ZIV (11%).

The 83-day lookback is no doubt an optimized number, as the paper’s author concedes.

Below I’ve shown key stats for other lookbacks from 73 to 93 days. Notice the steep drop off outside of values in the 80’s. While I think the general concept of momentum might be effective (relative to buy hold), I think that drop off is an indication that the big numbers the strategy would have posted to date are probably a bit generous.

What makes the strategy work? From the author:

Momentum (a form of trend following) has been a widely studied phenomenon in the literature and has been found in many asset classes…

It might be expected that there is momentum in volatility markets as well because of the persistence of volatility. The roll yield and VRP charts above show that there also seems to be persistence in these factors as well. Zooming in on the relevant charts we see that sign persistence frequently lasts for one, three, six months and even longer. So we might see momentum for look-back periods of a few months.

Finally, for the sake of completeness, a drawdown curve and monthly/annual returns for the original 83-day version of the strategy (click to zoom).

When the strategies that we cover on our blog (including this one) signal new trades, we include an alert on the daily report sent to subscribers. This is completely unrelated to our own strategy’s signal; it just serves to add a little color to the daily report and allows subscribers to see what other quantitative strategies are saying about the market.

Click to see Volatility Made Simple’s own elegant solution to the VIX ETP puzzle.

Good Trading,

Volatility Made Simple

Volatility Risk Premium Strategy And The (Preliminary) Outperformer Is

My insights have always been and will probably be offered for free, but if the information provided is helpful for your own trading business, any donation to my Be it! Children’s Charitable Foundation is much appreciated (donations can be sent via PayPal . see button on the right).

A couple of weeks ago I started a series of postings, all dealing with trading volatility ETNs / ETFs like XIV ® (VelocityShares Daily Inverse VIX Short-Term ETN) and VXX (iPath® SP 500 VIX Short-Term Futures™ ETN) and respective trading strategies. One of those strategies was DDN’s VRP Strategy ( D ouble - D igit N umerics. V olatility R isk P remium) due to its exceptional performance at least until December 2012 (original version) and its compelling approach (from the paper Easy Volatility Investing from Double-Digit Numerics).

Since then a couple of bloggers have taken up this issue (VRP) as well ( e. g. Volatilty Made Simple. Trading Volatility. QuantStrat TradeR. Evolution Trading. among others), some offering their services (including a VRP strategy) and insights for free while others are subscription based. If youre interested in the topic, please check for their blogs (highly recommended).

Most recently Volatilty Made Simple had an interesting article ( here ) about the different measures of implied volatility (e. g. VIX ®. VXMT ®. VX 30-day constant maturity) I present over the course of the series of postings mentioned above, and he is completely correct when concluding that any advantage of one over the others is likely the result of random chance . Fortunately Ill show you that there is a huge but. average does not mean average. especially in combination with those different measures of implied volatility mentioned before.

But first of all the Volatility Risk Premium (VRP) Strategy rules (always market on close):

Long XIV . 5-day average of [VIX ® – (2-day historical volatility of SP 500 * 100)] > 0

Long VXX . 5-day average of [VIX ® – (2-day historical volatility of SP 500 * 100)] ? 0

Hold until a change in position.

Image I shows the respective equity curves when this time utilizing different kind of averages instead of different measures of implied volatility (with one exception to the rule):

blue line . S imple M oving A verage (SMA)

orange line . E xponential M oving A verage (EMA)

green line . Exponential Moving Average, utilizing VIX ® futures VX 1 |VX 2 . merged into a continual time series as a 30-day constant-maturity futures price ( the underlying for VXX ® and XIV ® ), and using 1 instead of 0 as cutoff.

Utilizing the VX 1 |VX 2 cont. contract in combination with an (5-day) exponential moving average and 1 as cutoff outperforms all other averages by a wide margin and way beyond any SP 500 / XIV ® buy-and-hold strategy (but please note: these are all hypothetical not actual trading results, based on partly simulated VXX ® and XIV ® data), despite the fact that it up to now doesnt use any kind of position sizing and/or money management (the strategy is always all-in), no intraday buy/sell stops (end-of-day prices and orders only), do not utilize any kind of abnormal market filter (e. g. during market phases with extremely elevated volatility), the strategy is not adaptive (do not adjust to the ongoing changes in market conditions like bull and bear markets), there is no over-optimization (e. g. by applying additional rules for seasonalities like FED announcement days, the last 2 days before maturity, SP 500 overbought/oversold conditions, among others), and none of those findings presented before on this blog are applied, and and and.

Image I Total Equity Curve(s)

(03/26/2004 present)

Image II Drawdown Curve(s)

Image III shows the respective statistics (key figures) side by side.

( click on image to enlage )

(03/26/2004 present)

And last but not least monthly and annual returns (despite the German term for the respective months, I think you get the picture).

This will for sure not be my last posting dealing with the Volatility Risk Premium Strategy. From my perspective still the biggest hurdle to overcome are those periods in time when implied volatility (investor fear) is on the rise while realized volatility remains relatively calm, forcing the strategy to stay long XIV ® (short volatily) way too long and driving the net asset value into a severe drawdown, like it happened most recently (since December 2014).

Have a profitable week,

Disclosure . Iam long/short XIV, and long/short VIX, RVX and EURO STOXX 50 volatility futures.


Remarks . Due to their conceptual scope and if not explicitly stated otherwise . all models/setups/strategies do not account for slippage, fees and transaction costs, do not account for return on cash and/or interest on margin, do not use position sizing (e. g. Kelly, optimal f) theyre always all in . do not use leverage (e. g. leveraged ETFs), do not utilize any kind of abnormal market filter (e. g. during market phases with extremely elevated volatility), do not use intraday buy/sell stops (end-of-day prices only), and models/setups/strategies are not ‘ adaptive ‘ (do not adjust to the ongoing changes in market conditions like bull and bear markets). Index data (e. g. SP 500 cash index) does not account for dividend and cash payments. The results are regularly based on simulated data and/or hypothetical performance and do not represent real trading.


The information on this site is provided for statistical and informational purposes only. Nothing herein should be interpreted or regarded as personalized investment advice or to state or imply that past results are an indication of future performance. The author of this website is not a licensed financial advisor and will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on the content of this website(s). Under no circumstances does this information represent an advice or recommendation to buy, sell or hold any security.

I may or may not hold positions for myself, my family and/or clients in the securities mentioned here. Actions may have been taken before or after information is presented, and any opinions expressed in this site are subject to change without notice.

(Data courtesy of MetaStock and Pinnacle Data Corp.. and for data import, testing, surveys and statistics I use MATLAB from MathWorks )

Trading Volatility Some XIV and VXX (Ir)Regularities

This is a (short) follow up to my previous postings Volatility Risk Premium – Trading Volatility (Part I) to Volatility Risk Premium – Trading Volatility (Part III). this time dealing with some intersting (ir)regularities concerning the XIV ® (VelocityShares Daily Inverse VIX Short-Term ETN) and VXX ® (iPath ® SP 500 VIX Short-Term Futures™ ETN). Some food for thought over the weekend.

Image I shows the respective distribution of returns holding long XIV ® (VelocityShares Daily Inverse VIX Short-Term ETN), and trading long XIV ® in the event (and as long as) the SP 500 2-day RSI closes below 5 (so called oversold conditions) and above 95 (so called overbought conditions). Not surprisingly returns are skewed to the left in the event selling short volatility (long XIV ® ) when the market already had a strong run up (2-day RSI > 95). The opposite applies in the event selling volatility when the market had sold off (2-day RSI < 5). Returns are (significantly) skewed to the right, and XIV ® gained between 1% and 5% in 4 out of 10 occurrences.

Image I Distribution of Returns (XIV)

(03/25/2004 10/29/2014)

Image II shows the median (not the average, which is skewed by outliers on both ends) gain with respect to the day of the week. My first thought was it should be the Friday which shows the biggest gain due to the VIX ® and VIX ® futures regular behaviour to close lower before the weekend. Far wrong

Image III Median Gain / Loss w/ Day of Week

(03/25/2004 10/29/2014)

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A quantitative strategy for trading inverse volatility with impressive backtested results

A quantitative strategy for trading inverse volatility with impressive backtested resultsHistorical backtesting calculates impressive hypothetical gains.

Objective buy and sell triggers eliminate most of the guesswork.

Individual judgment must still be exercised whenever a volatility spike is known to be imminent.

This article is an expansion and extension of a comment that I initially posted here on Seeking Alpha in response to an article by Nathan Buehler. My comment summarized the results of quantitatively backtesting Buehler's backwardation/contango trigger strategy for shorting volatility, but I added my own objective exit strategy.

Principles of the Backtesting Model

I applied the following rules in backtesting analysis. These rules are objective and quantitative; therefore the reported results can be verified independently by anyone who is up to the challenge of writing the appropriate Excel code.

1) I based my evaluation on the (theoretical) purchase of VelocityShares Daily Inverse VIX ST ETN (NASDAQ:XIV ) long, an inverse VIX futures ETN, at the market closing price. The returns of ProShares Short VIX Short-Term Futures (NYSEARCA:SVXY ) are indistinguishable from those of XIV, but XIV was created first, so its real prices go back earlier in time.

2) Real XIV closing prices, adjusted for splits, were used back to the ETN inception date of Nov. 30, 2010, available here from Yahoo Finance. For theoretical XIV prices prior to inception, I used the calculated/modeled prices of XIV back to March 26, 2004, posted here at the Intelligent Investor Blog. When downloaded, the data set was current through Sept. 26, 2014. The same spreadsheet was the source of my front-month and second-month VIX futures closing prices.

3) I define the backwardation of VIX futures as being when the second month futures price is less than the front month futures price at close of trading (4:15 p. m. ET); I define contango in VIX futures as being the reverse situation at close of futures trading. Only closing prices are considered in this analysis.

4) I define a buy signal for XIV as being when the VIX futures first move into backwardation (based on closing price) one day, and subsequently move back into contango one or more days later, following the model developed by Nathan Buehler. A buy signal is generated the first day that the futures prices reverted to contango as defined above, and XIV is (theoretically) purchased at its closing price the same day.

5) No exceptions were made in the analysis for subjective economic or geopolitical considerations. By nature, such exceptions can neither be objectively nor quantitatively backtested.

6) I tested to determine the optimal limit sell price to maximize overall gains. I also tested to determine the optimal stop sell price for losing trades. Finally, in order to avoid unnecessary losses during major spikes in volatility (as in 2008 and 2011), I tested to determine an optimal trailing stop strategy. The results are all summarized below.

7) XIV was theoretically bought/sold at the market close price the same day that the buy/sell signal was triggered.

8) The model assumes that 100% of the account balance is committed to each trade. All gains or losses are parlayed into the next trade. Results are reported based on an initial investment of $25K.

9) Theoretical gains calculated by the model are pre-tax, and do not account for brokerage fees or margin interest charges. Real gains would have been less after these expenses were paid.

Results of the Modeling

1. The Buy Cycle . After the previous buy cycle has been completed, a new buy cycle begins when the VIX futures enter backwardation at close one day and then revert to contango one or more days later. The buy signal is immediately triggered, resulting in the purchase of XIV (inverse volatility) at the market closing price the same day. A buy cycle ends when either, based on the initial trade price, (1A) the closing price of XIV drops below its stop loss price (see 2A below); or (1B) the price of XIV exceeds its limit sell price (see 2C below). Although the position may be sold based on a trailing stop as described in (2B) below, this event does not end the buy cycle. A new buy signal cannot be generated until the previous buy cycle has been closed.

2. The Exit Strategy . The exit (selling) strategy has three considerations, presented in order of priority . (2A) The optimal stop loss limit was determined to be -37% relative to the original purchase price. Absorbing this large of a loss will be uncomfortable to many investors. (2B) Once the investment gains surpass a defined threshold, a trailing stop is implemented. Modeling identifies the threshold limit as +38% gain relative to the original purchase price, and the trailing limit as a loss of -32% relative to the highest closing price prior to any downturn. (2C) The position is closed when the share price exceeds the established limit sell price on market close. The optimal limit price was identified as +132.8% relative to the initial purchase price.

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Trading strategy performance measures

Trading strategy performance measuresWelcome to TradePerformance™

If you are an active trader, you need software designed for your unique needs. Only TradePerformance provides all the features you need to track, measure and improve your trading results on a continuous basis. TradePerformance™ is more than trade accounting. TradePerformance incorporates the Best Practices of Trading in a single integrated package. It is truly a Trading Management System.

How is Your Trading Performance? In today's competitive market, it takes more skill, knowledge and discipline to consistently make money in the financial markets. If you are serious about becoming a better trader, we invite you to take a closer look at TradePerformance.

Does you broker provide the Trading Performance reports? Most do not! If you are actively trading, it is time to take charge of your situation.

TradePerformance ™ V2 - Features Overview:

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Define and monitor t rading rules and alerts

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Tracks Unlimited Accounts and Positions

Tracks long and short positions

Scale into and out of positions

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Analyze results by: account, strategy, date range, security type, symbol etc

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Reminder List

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What Our Users Say.

The following are unsolicited quotes from some of our users:

I believe my trading has improved since using Trade Performance.

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It is surprising that with all the discussion about risk management, there are so few software tools to help manage risk.

Did you know Trade Performance was reviewed in the May issue of Active Trader? The article was entitled, “Risk-Control Software Revisited.” I evaluated the products listed in the article and you have the best product!

TradePerformance ™ Sample Screenshots:

Here is just one example of the power of TradePerformance. The following screen shows you the automatic lot matching capability. As your trades are entered, TradePerformance automatically matches these with others of the same investment in that account. This enables scaling into and out of positions. In the following screenshot, the highlighted position was open with three separate Short trades and was closed with three CoverShort trades all at different prices. All these trades are collected into a single position, matched automatically and then Profit/Loss, Average Buy, Average Sell, Gain/Loss as well as many other trading statistics are instantaneously calculated and updated in the system. (Note: This feature is also useful when you have with partial fills at different prices on a stock order).

Another example of the power of TradePerformance is the ability to extract and report on your performance based on a number of filter criteria. In the following example I have extracted my Daily Profit and Loss for one month using one specific strategy. You can also select based on symbol or account etc.

Ulcer Performance Index

The Ulcer Performance Index is a measure of investment or trading strategy performance and is constructed by dividing the excess return by the Ulcer Index. The calculation is almost the same as in the Sharpe Ratio, which is computed by dividing the excess return (Total strategy return minus the risk free rate) by the strategy or investment standard deviation.

In the Ulcer Performance Index, the Ulcer Index. which is a measure of risk (It measures the duration and depth of drawdowns), replaces the standard deviation. Measuring investment performance using the Ulcer Index has many advantages. First, unlike the standard deviation the Ulcer Index calculates downward changes only (The bad risk or the risk that really matter to traders and investors). Second, the Ulcer Index calculation takes into account the strings of losses that may result in significant drawdowns.

The Ulcer Performance Index can be found in the simulator report. You can also use the current technical analysis indicator to create trading rules based on the Ulcer Performance Index of individual securities.

rule = UlcerPI(5, 250) > 2;

In the first parameter, I have specified the risk-free rate, while in the second parameter I have set the look back period or the number of trading bars that is used to calculate the total return and the Ulcer Index.

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About Our Daily Indicators

We track several different indicators for trading volatility ETPs (Exchange-Traded Products). Each indicator is a signal-based strategy which allows us to identify and trade along with directional trends. By using signal-based indicators we are able to remain objective in our trading and minimize errors that arise from making emotion-based decisions.

Following our strategies simply involves trading securities in the same direction of the indicator. This means buying a security when the indicator becomes positive, and selling a security (and buying the inverse) when the indicator turns negative.

Each indicator takes daily readings of market data after the close. The indicator values are then published on a set of gauges on our Daily Forecast page and emailed to subscribers. If any indicator changes direction and triggers a buy or sell signal, automated email alerts are also sent to any subscribers who wish to receive that alert.

Dual Strategies For Trading VXX XIV

We currently offer two strategies that apply to trading short-term VIX futures ETPs, such as VXX, XIV, and SVXY. Each of these strategies takes a different approach for maximizing gains. Because no single strategy is perfect and the market is inherently unpredictable, we use the two strategies simultaneously to compensate for weaknesses within each of the strategies to reduce drawdowns and smooth out returns over months and years.

1) VXX Bias strategy

- Our Bias strategy is constructed using VIX futures data along with a component which monitors underlying momentum changes in the term structure.

- A positive value indicates a buy signal for VXX, while a negative value indicates the sell signal (and a buy signal for XIV).

2) Volatility Risk Premium (VRP) strategy

- Our VRP strategy is a variation of a commonly used indicator for measuring forward implied volatility versus actual volatility.

- A positive value indicates a buy signal for XIV, while a negative value indicates the sell signal (and a buy signal for VXX).

--> Combined "VRP+VXX Bias" strategy

- We buy XIV or VXX only when the VXX Bias and VRP signals agree on the direction for the trade.

- When they do not agree, the portfolio is in cash (approximately 30% of the time).

Tracking Performance

The most recent six months of forecasts is always available on our Daily Forecast page. Our backtested results include analysis of data since VIX futures began trading, and are summarized below.

Annualized percent gain/loss results for each of our strategies used with XIV VXX are shown in the following table. For benchmark comparison purposes, a portfolio consisting of a "buy and hold" approach in XIV is included in the right column (Note: Daily prices for VXX and XIV prior to fund inception have been derived from actual VIX futures data).