Today is all about the VTS Aggressive Vol Strategy.
YouTube Strategy Video: https://www.youtube.
Because I get so many questions directly about this strategy, I thought today’s review would be just answering the most common ones. Feel free to scroll down and see if any catch your eye.
1) Is the Aggressive Vol Strategy available for AutoTrading?
Yes, all 5 of our VTS Strategies are available for AutoTrading on both Global AutoTrading as well as eOption. If you’d like more information, please check out my YouTube video explaining the basics of AutoTrading:
2) Will the Aggressive Vol strategy always be the most active of the three strategies you offer?
While that’s not mathematically guaranteed because these are three different strategies with three different sets of indicators, in all likelihood yes it should be the most active and probably by a significant margin.
While it can be a close race in some market environments, you can see so far there has not been a year where it wasn’t the most active. I always think long-term is what matters most and again, long-term it’s quite a bit more active.
VTS Aggressive Vol – 73% in trades
VTS Tactical Volatility – 40% in trades
VTS Conservative Vol – 45% in trades
3) Will the Aggressive Vol Strategy always be the top performer?
Hopefully all of you are still subscribers in 20 years and we can really nail down a thorough answer to that one, but as of right now the answer is no, not every year. There are market environments where being more active will be a disadvantage. Let’s not forget these volatility ETPs have only existed within the context of the 2nd longest bull market in history. Our data set is fairly one sided so far, so more time is needed and a few major market declines would certainly help determine the more robust strategies.
Warning: Unsolicited golf analogy: I remember back in University there were always teammates who wanted to play the shorter forward mens tees because the courses were brutally long and difficult in the dead of winter in Vancouver. Our coach always said, pro tees! We need to separate the men from the boys
Volatility investing is like that. We need a little bear market to see what’s what. I’m looking forward to it 🙂
In favorable years where volatility is muted, yes the Aggressive Vol strategy should outperform the others and the past couple years are examples of that. The more trades that were taken, likely the more profit that was made.
However in more difficult years like 2014 and 2015 where we saw wild swings in both directions it’s actually an advantage to not be in the market as much. Over that 2 year period the Aggressive Vol Strategy underperformed both of the other strategies.
But in general yes, it should perform better on an absolute basis which leads to the next question:
4) Will the Aggressive Vol Strategy have bigger drawdowns?
Again no guarantees, but yes I anticipate larger drawdowns within this strategy. Here is a monthly drawdown curve and you can see the Aggressive (yellow) has seen deeper drawdowns compared to the Conservative (orange). And the main Tactical (green) is right in the middle.
VTS Family of Volatility Strategies – Maximum Drawdowns:
– VTS Aggressive Vol Strategy: -38.6%
– VTS Tactical Volatility Strategy: -26.5%
– VTS Conservative Vol Strategy: -12.7%
5) Can I replace the tickers SVXY and VIXY with other ones?
The reason I use SVXY and VIXY for this strategy is there are probably going to be some people who choose to trade multiple strategies at once. It’s much easier to do that within the same account if all the strategies trade different tickers:
VTS Aggressive Vol Strategy: SVXY & VIXY
VTS Tactical Volatility Strategy: XIV & VXX
VTS Conservative Vol Strategy: ZIV & VXZ
– XIV and VXX are easy, they will replicate the performance almost exactly so if you prefer those ETNs instead you can do that.
– Using ZIV and VXZ will work as well, but those are definitely going to change the results because they focus on the 4th – 7th month futures. I’d like to do a full article / video on this topic and go through all the details so for now we’ll say no, don’t replace with ZIV until you have all the information.
Current VTS Total Portfolio Solution Allocations
VTS Aggressive Vol Strategy – Optional replacement for higher risk tolerance investors
VTS Conservative Vol Strategy – Optional replacement for lower risk tolerance investors
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