Given the nice bounce off the fairly scary back to back volatility spikes recently I’ve had some great questions on the level of contango / backwardation in the VIX futures and whether that’s a signal to buy the XIV.  And this is actually something I’ve seen repeatedly in the last year online, on Twitter etc.  I’d like to try to show first of all why this is a common opinion in just the most recent 12 month period, and then show you why it’s actually wrong.

So first, here’s what the results would have been for a strategy that checked every morning and simply followed the VIX term structure since March 1st, 2016.  (That was the last correction in the markets)

So pretty solid right?  No wonder the short volatility trade is getting so crowded this year right?

But now let’s look at the exact same strategy from inception date up until March 1st, 2016:

That is one of the ugliest performance charts I’ve ever seen, and let’s not forget that it took place entirely during a raging bull market.

So while it’s true the past one year has been a crazy year with equity market calmness and low volatility the likes of which we see on average once every couple decades, I would caution people against allowing “recency bias” to affect their trade decisions.

That chart of 2012 – 2016 is the norm.  2016 to present is the exception.

There’s too many people lately who think it’s the other way around, but making trading decisions based on the exception to the rule is probably not a winning long term strategy.  Nobody knows when, but things will return to normal at some point.  Here’s the full chart from inception date until today:


Current VTS Total Portfolio Solution Allocations

25% VTS Tactical Volatility Strategy

50% VTS Tactical Balanced Strategy

25% VTS Iron Condor Strategy

VTS Conservative Vol Strategy  –  Optional replacement for lower risk tolerance investors


Want to see our current positions and daily trade signals?

  Consider Subscribing   –   Free 2 week Trial for all subscriptions

  Sign up for the Awesome VTS Newsletter  –  Free 1 month access

The Volatility Advisor

Making volatility investable through education and active management

Limited Offer

Start your  FREE 2 Week Trial  Now

Gain full access to all 4 of our successful trading strategies for a full two weeks, absolutely free.

It's time to start growing your retirement fund