Verifiable Volatility ETF Trading Results

25Oct11

While we’re on the subject of volatility…

My long/short trading hasn’t been doing well in this market.

That shouldn’t come as a surprise. Being transparent about trading results is a double-edged sword – great when things are going well, shite when they’re not.

What has been working very well for me over the last year, and has really begun to consume the aggressive side of my personal investing, is trading volatility ETFs (specifically VXX and XIV).

Readers know I don’t tout what I can’t demonstrate empirically – I’d go so far as to say I despise those who do – so starting next month I’ll be providing verifiable results of my vol ETF trading here at the blog.

Similar to what I’ve done with the TAA model, I’ve opened a small account at IB, separate from my personal investments, that will only trade vol ETFs without deposits, withdrawals or anything else that makes following results difficult. Account statements will be uploaded to MarketSci.com.

This isn’t something I intend to monetize, just something I want to be open and honest about before I begin talking more about trading vol ETFs here on the blog.

Happy Trading,
ms

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6 Responses to “Verifiable Volatility ETF Trading Results”

  1. 1 brekekex

    Michael,
    Looking forward to observing your volatility trading. It seems like many traders (and I guess big institutional players as well) turned in this direction. It will be interesting to see if/when volatility trading gets to a scale that may shrink the contango/backwardation edge.
    I sometimes wonder if you ever regret retiring some of your old strategies. I remember when you dropped the original MarketSci strategies, as they underperformed the then shining YK and RH. For me personally differentiating between a temporary underperformance and end-of-the-story for a strategy is quite difficult, I am prone to drop a strategy just before its revival. I suppose you keep monitoring your old ones, don’t you?
    I am glad you are back to publishing more frequently, your posts are a breathe of fresh air.
    Andras

    • 2 MarketSci

      Hello Andras – the only strategy I regret dropping was Scotty. It would have performed fairly well since. The others would have underperformed my expectations so they were sound decisions.

      As to your first point – about crowding in the vol ETF/futures/options space – that’s the million dollar question – we are in a brave new world.

      The only thing I can offer up is that based on the data I’m running, none of these products seem to be responding very differently to what’s happening to the VIX and volatility than it has in the past, so that’s an indication that so far the piling on isn’t having an affect.

      michael

  2. 3 Mario

    What platform do you use if you don’t mind my asking? I am looking at switching to IB for a whole host of reasons but I need to find a suitable platform to use as I don’t like theirs. I am considering Ninja Trader but I have a mac…I am considering partitioning my hard-drive though if need be or just buying a PC for my investments/trading. Currently I use TOS and although I like their system and tools, there a few things I am not happy with. Thoughts?

    thanks and be well!

    • 4 MarketSci

      Hello Mario – unfortunately can’t help – I use IB’s Trader Workstation platform. michael

  3. 5 Rod

    I look forward to it. I got caught out buying XIV expecting voly reversion, but the backwardation in the index caused it to decline while the index stayed between 30 and 40.
    Rod

  4. 6 congamike

    I also trade volatility except I use TVIX and XIV.

    http://velocityshares.com/pdf/TVIXProductPage.pdf


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