Archive for the ‘VIX & Volatility’ Category

Back in 2012, I penned a friendly debunking of TradingMarkets.com’s RSI(2) mean-reversion strategy for trading the volatility ETN XIV. The thrust of the post was that TM only tested the strategy back to the launch of XIV, which led them to write “they had never seen numbers like this in equity trading”, but had they […]


Random thought for the day… I (humbly) disagree with folks who poo-poo VXX (long 1-month VIX) as a bad investment. Let me rephrase that. I think it’s very worthwhile to educate investors about why buying VXX is usually a bad choice (read more), and why buying VXX for the long-term is always a bad choice, […]


This is a follow up to a strategy presented by STS in Profit by Combining RSI and VIX, and originally proposed by Larry Connors in Short Term Trading Strategies that Work. The strategy applies the popular short-term indicator RSI(2) to the VIX index and uses the result to time the S&P 500. [logarithmically-scaled, growth of […]


A reader asked an interesting question: what does the VIX futures term-structure (contango versus backwardation) say about future stock market returns? My off-the-cuff answer was that the VIX term-structure is only predictive for volatility ETFs like VXX or XIV (because of the impact of the underlying VIX futures converging to the VIX spot), and that […]


Keeping with my theme from my last post, I’ll look at a common passive investment strategy, a 50/50% investment in SPY (S&P 500) and IEF (10-year UST), and replace the equity exposure with a (volatility-equivalent) investment in the volatility ETF XIV. First our baseline, a 50/50% investment in SPY/IEF rebalanced monthly (frictionless): [logarithmically-scaled, growth of […]