VTS Conservative Vol vs VTS Aggressive Vol
Just a reminder that the Conservative Vol strategy is not just the VTS Aggressive Vol strategy with the tickers switched out. It follows it’s own rules and has different timing. In general it enters trades later than the aggressive strategy does and will exit positions sooner. There’s a couple things that make it more “conservative”
1) It uses the ZIV and VXZ which are derived from the 4th – 7th month VIX futures, and those ones further out in the curve tend to move slower. So using ZIV and VXZ means up days tend not to be as big, and down days are also more muted.
2) Trade frequency is lower. The thresholds for signals are tightened up to only allow roughly 45 – 50% of trading days to have a position and the rest to be in cash. Now during stable periods in the volatility markets the strategy may be allocated 100% of the time for several months in a row, but in the long-run it does target about 50% activity to be more consistent.
So it’s really just a matter of matching your own level of risk tolerance to the strategy. For people who do like to have higher trade frequency, perhaps the Aggressive is more suitable. If you don’t mind being in cash and really scrutinizing the signals before entering than the Conservative Vol may have your name on it. And of course trading a combination of both would be fine as well and position you in the middle of the risk tolerance spectrum. I have included a 50/50 combined strategy page on the website so people can see those results.
If you haven’t seen it yet, I did a video a while back talking about this choice which I’ll include below. You can check it out at your convenience.
* Remember, before the volatility event in February when the video was made we had three strategies. The VTS Tactical Volatility was positioned right in the middle of the risk tolerance spectrum. However since there are no more 1x front month volatility products we have temporarily paused that strategy. I would imagine it will return in the future as the volatility space grows and evolves, but for now trading a 50/50 combined will recreate that original strategy very closely.
** Another aside: The VTS Tactical Volatility Strategy was also safely in cash during the volatility spike in February.
Current VTS Total Portfolio Solution Allocations
10% VTS Conservative Vol Strategy – Optional replacement for lower risk tolerance investors
10% VTS Aggressive Vol Strategy – Optional replacement for higher risk tolerance investors
Temporarily paused: VTS Tactical Volatility Strategy
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