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drew9
171 posts
msg #108525
Ignore drew9
10/24/2012 7:43:47 PM

I am not sure how you can say XIV and VIX are different animals. That is somewhat true but XIV is derived entirely off of the VIX. It is based completely on VIX Futures. It is rebalanced daily. Since you cannot trade the actual VIX directly, XIV or other similar instruments are the closest we can get. Looking to the actual VIX daily will certainly allow you to get a good representation of how XIV and others might perform. When the VIX is very high and turns down, that is the time to buy XIV (its inverse) to go long. Here is a good article that explains a bit how they work.

http://seekingalpha.com/article/744231-easy-gains-from-xiv ]


BarTune1
404 posts
msg #108544
Ignore BarTune1
10/25/2012 8:03:20 PM

I guess what I am saying is the $VIX is not as correlated to the VXX or the XIV as much as one might think. I read the Seeking Alpha article. If you have time, watch the video here and Larry Connors himself explains the difference:

http://store.tradingmarkets.com/courses/etf/connors-research-volatility-trading-strategies-summit-b.html#vid

I played the VXX in the past off $VIX signals and while the two generally move in tandem, thats not always true. This may not be the best analogy; but why play the S&P100 off a S&P500 signal.

Incidentally, Connors agrees that it is generally better to play the VXX on a trend following basis rather than on a mean reversion basis.

drew9
171 posts
msg #108571
Ignore drew9
10/26/2012 2:40:44 PM

BarTune, I agree with what you are saying. I think in most cases the direction should be the same but the movement may be different between the various instruments. Bottom line is I was trying to make the point that it is better to wait for confirmation on a mean revision play. I am interested in the trend strategy you mentioned. I did watch the video but it did not give any details. Did you subscribe or have any other details around that or any of his other strategies?

drew9
171 posts
msg #108575
Ignore drew9
10/26/2012 3:47:54 PM

Found this and thought it might be interesting reading for others as well regarding VIX strategies.

http://seekingalpha.com/instablog/70713-marcjoli/1102401-anthology-of-writings-essential-to-volatility-traders


BarTune1
404 posts
msg #108581
Ignore BarTune1
10/26/2012 8:50:49 PM

Drew, I have quite a bit of his materials but not the work on volatility ... although I am considering it because his systems have been my bread and butter. I can't say I disagree regarding confirmation. Incidentially, I was talking to Kevin a month ago and he used Strataseach to look for the best trend following signals to trade the VXX (and indirectly the XIV). When we last talked about this he was looking at optimal MACD combinations to make the trend following trades. However, in the end, he was not able to isolate any stellar trend following systems.

Connors claims to have some pretty good systems .... and, in the end, they are usually relatively simple. I would like to study the topic more but don't have the time - which is why i might buy his research materials.

We could send Kevin back to the blackboard on this one, but he has to be interested in it to pursue it. He's like a dog with a bone once he tackles a system. Our best bet would be if he started a thread because he won't stop until he runs around 100 variations and tweaks of the filter.

drew9
171 posts
msg #108592
Ignore drew9
10/27/2012 5:08:09 PM

After reviewing some of the info online, a 10/20 day MA crossover system seems to be the one most discussed. I decided to give this a go using XIV for long trades for the upside bias and VXX for short trades for the downward bias. The results for the past two years were quite impressive. The filter was simply MA(10) crossed above or below MA(20) depending on the ETN and reverse on the exit. Here is what I came up with:

Test started on 2010-10-29 ended on 2012-10-26, covering 503 days
Filter used:
VXX Short 10/20 MA Filter (saved filter))

Trade Statistics
There were 9 total stocks entered. Of those, 9 or 100.00% were complete and or 0.00% were open.
Of the 9 completed trades, 6 trades or 66.67%resulted in a net gain.
Your average net change for completed trades was: 10.41%.
The average draw down of your approach was: -9.56%.
The average max profit of your approach was: 20.35%
The Reward/Risk ratio for this approach is: 4.35
Annualized Return on Investment (ROI): 85.72%, the ROI of ^SPX was: 9.46%.

Approach Name: XIV 10/20 MA Crossover
Test started on 2010-12-10 ended on 2012-10-26, covering 474 days
Filter used:
XIV MA Filter (saved filter))

Trade Statistics
There were 10 total stocks entered. Of those, 10 or 100.00% were complete and or 0.00% were open.
Of the 10 completed trades, 6 trades or 60.00%resulted in a net gain.
Your average net change for completed trades was: 9.81%.
The average draw down of your approach was: -7.55%.
The average max profit of your approach was: 24.97%
The Reward/Risk ratio for this approach is: 3.81
Annualized Return on Investment (ROI): 97.27%, the ROI of ^SPX was: 7.52%.

This provided for around a 90% annual compounded return and took a $100,000 account to $360,000. ($144,000 gain for XIV and $116,000 gain for VXX). This was for the two years and did not include all the compounding possible as they were two separate tests and I just added the results together. I really like the results but when looking at the trades there were two losses (15% and 18%) that might be hard to deal with for some folks - myself included. I did not use a stop loss.

So let's use this as a starting point and see what we can do to improve on it! Sure is a simple system and the results were nice for only 19 trades over two years. Perhaps these results will be enough to entice Kevin to jump in? We sure appreciate all you do!

BarTune1
404 posts
msg #108596
Ignore BarTune1
10/28/2012 4:07:06 PM

Thats very interesting Drew ... I am going to take a closer look at it ... although my job is interfering wth my trading. Off the top of my head, I typically scale into trades, especially upon deeper pullbacks. So I was looking at the drawdowns on the positions. I don't have the detailed trade results, but am wondering how your results would turn out if you added an additional unit on say any 10% pullback on your initial entry.

I typically play $10K units on equity trades but, because of the volatility of VXX or XIV shares, play increments of $6K.

drew9
171 posts
msg #108601
Ignore drew9
modified
10/28/2012 7:53:30 PM

BarTune, that is a very interesting idea and I welcome your comments. Might have to test that manually as I can't think of a way to do it with SF even though we can now add more entries. Here are the results from VXX:

Symbol Trigger date Entry Price Exit Date Exit Price Draw Down Max Profit Gain/Loss(%)
VXX 3/30/2011 118.8 6/16/2011 99.6 -0.44 28.96 16.16
VXX 7/1/2011 80.96 7/22/2011 82.8 -19.17 1.78 -2.27
VXX 10/14/2011 162.5 2 11/11/2011 174.96 -20.11 11.54 -7.65
VXX 12/5/2011 162.64 2/22/2012 106.92 -8.34 41.76 34.26
VXX 3/1/2012 96.28 4/16/2012 74.4 -9.06 35.31 22.73
VXX 4/26/2012 64.72 5/16/2012 76.4 -20.33 2.16 -18.05
VXX 6/13/2012 81.76 8/3/2012 50.16 -1.57 38.85 38.65
VXX 8/6/2012 46.76 9/5/2012 45.56 -4.79 5.73 2.57
VXX 9/6/2012 39.16 10/26/2012 36.3 -2.25 17.06 7.3

And here are the results from XIV:

Symbol Trigger date Entry Price Exit Date Exit Price Draw Down Max Profit Gain/Loss(%)
XIV 3/30/2011 13.83 6/15/2011 16.95 -0.35 37.11 22.58
XIV 7/1/2011 19.04 7/21/2011 17.66 -17.23 1.68 -7.25
XIV 10/17/2011 6.25 11/8/2011 6.09 -13.44 18.4 -2.56
XIV 12/6/2011 5.81 2/22/2012 8.31 -7.23 65.4 43.03
XIV 3/5/2012 8.48 4/13/2012 11.09 -2.48 58.49 30.78
XIV 4/27/2012 12.06 5/16/2012 10.15 -17.33 3.32 -15.84
XIV 6/15/2012 9.68 8/2/2012 11.97 -1.03 38.64 23.66
XIV 8/7/2012 13.34 9/4/2012 13.86 -0.75 9.82 3.9
XIV 9/6/2012 16.22 10/9/2012 17.68 -3.27 13.5 9
XIV 10/15/2012 18.08 10/26/2012 16.41 -12.44 3.32 -9.24



tennisplayer2
180 posts
msg #108604
Ignore tennisplayer2
10/28/2012 10:52:00 PM

Drew, on your backtest of XIV, isn't the trade on 7/1/2011 (buy at 19.04 and sell on 7/21/2011 at 17.66) a loss? Thanks.

drew9
171 posts
msg #108608
Ignore drew9
modified
10/29/2012 9:32:12 AM

Yes thanks for catching that and I did revise it. I spent so much time trying to move the columns and make it line up and I apparently lopped off a minus sign. So much for all the effort as when you post it they are nearly unreadable. I wish SF would fix this so items would post exactly as they are written!

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