XIV / VXX Trading Strategy

by | Sep 21, 2014

*The charts in this section are updated periodically so please check back often for the latest developments.


The introduction a few years ago of various volatility related products such as the XIV brought with it the opportunity to make outsized investment returns compared to traditional asset classes.  These products however are very complicated and have left in their wake a graveyard of blown up trading accounts and disappointed investors.  One look at a chart of the XIV price action since it’s launch will reveal why:

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Depending on the timing of entry and exit, results can vary wildly.  With the advantage of 20/20 hindsight we can see that the XIV was a tremendously good product to hold during the stable bull market period from 2012 to late 2014 .  On the other hand it was a portfolio melting disaster during market downturns such as the European debt crisis in 2011 where it collapsed over 70%, and more recently the stock market correction in August of 2015 where it lost 50% of it’s value in a week.

Since nobody can time the markets with any consistency in the short-run, the XIV is just too unpredictable and dangerous to hold for extended periods of time.


Our Strategy:

What we do here at Volatility Trading Strategies is track an extensive set of market indicators that allow us to participate in most but not all of the upside gains in the XIV, and at the same time avoid most but not all of the downside losses it experiences.  We focus exclusively on risk management, scrutinizing the trade signals and only acting on the ones we have the highest conviction in.

It’s not difficult to know what to do during strong trending markets in either direction. The majority of systems that trade the XIV will agree on those stronger signals. Our long-term success lies in our singular focus on mitigating risk and avoiding the ambiguous signals that leave many others on the wrong side of the trade. As a result, we turn the roller coaster ride from the XIV chart above into a peaceful drive in the country.

Now here’s the results from our VTS Tactical Volatility strategy:

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Our extensive list of indicators are all forward looking so regardless of what the market has in store for us in the coming years, we’ll be ready.  For a small subscription fee you too can participate in our successful trading system.


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