VTS Community,

We’ve got some great news, some good news, some bad news, and then some good news again  🙂  Let me go through them in that order:

 

Great news:  We were in cash and gold during the largest volatility spike since October 1987.  We could have gone on a short vacation last week, come back today and been none the wiser to the carnage so that is truly a blessing.  Making profit is great and it’s obviously very important so we will be looking to get into some advantageous positions as soon as market conditions allow it.  However the true secret to long term success is not suffering the large blowups.  Small losses along the way are fine, it’s part of the process, but big losses are no bueno as far as building our retirement funds.

 

Good news:  Elevated periods of volatility and market calamity are often times opportunities for those who are safe and preserve capital.  Obviously we are going to be very cautious going forward because even if the markets do bounce, that certainly doesn’t mean the selling is over.  A volatility event like that will have lasting effects and I think it would be wise to expect wild swings in both directions in the coming days.  Sitting on ones hands is a pretty solid game plan at this point.  Having said that though, we will be looking for opportunities and safe entry points.

 

Bad news:  It has been announced that the inverse volatility product XIV will be terminated.  It was down huge during market hours as is expected when the VIX index spikes 115%, but as soon as markets closed the floor fell out and it dropped to shockingly low levels.  It’s hard to say how accurate our trading softwares are during a crash like that, but I suspect I’ll be looking back on these pictures for many years:

XIV, rest in peace.  Nov. 30, 2010  –  Feb. 5, 2018

SVXY.  Apparently it’s still going to be managed as usual.  I’ll keep you updated but this one looks like it will survive.

VIX Index has it’s largest spike in history.  If it existed back far enough October 1987 would have been much worse, but 115% is the biggest daily spike by a very large margin for the past 27 years.

Some more good news again:  Most of the volatility products will continue uninterrupted and they are there for us to continue trading as usual when the markets give us the green light.

It appears that ZIV is going to be managed regularly as well.  I don’t like to play favorites but as many of you know I have been pretty vocal about how underrated I think ZIV is as a product.  I think it’s a fantastic balance between risk and reward.  The only issue has been the volume is a little low, but perhaps with XIV being terminated the ZIV will pick up some of that capital.  Things may change a little bit here and there but there are many ways to accomplish the same goal.

At the end of the day we are harvesting the volatility risk premium, and there are many ways to do that. 

I’m a diversified investor and I believe that most of you are as well.  I have a few battle scars myself from days past and they’ve taught me to always spread out my focus to multiple strategies.  I also have things in the pipeline that I’m always working on and testing so there will always be exciting times ahead.

There’s very few things that are a guarantee in the investing world, but here’s something I can say with 100% confidence.  I will be doing this my whole life and no single day or single event is going to change that.  It was scary yes and we still don’t fully know what it all means, but I see opportunity.

Let’s take it easy for the next few days, digest what’s happening, and then soon it’ll be time to re-focus and get after it again.  We’re winners, we’re going to crush this!

Current VTS Total Portfolio Solution Allocations

25% VTS Tactical Volatility Strategy

50% VTS Tactical Balanced Strategy

25% VTS Iron Condor Strategy

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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