“If you try to please everybody, you end up pleasing nobody”
That’s a quote I always keep in mind when managing my business. It reminds me to stay focused on my investing philosophy, my message, my target audience. If a change needs to be made to remain true to my long term goal then I make it regardless of whether it will please or displease some people. That doesn’t mean it’s not difficult (and a little stressful) to make changes, especially with a community of individuals as large as ours. You never really know how people will react…
I’m pleased to report though I didn’t receive a single negative comment about us merging the options strategies or adding stock replacement to the family of volatility strategies. The changes make sense and are necessary, and it’s very nice to see that everybody agrees 🙂
So most of the questions coming in were asking what it means going forward. Well not much will change to be honest.
1) VTS Discretionary, our options strategy that has merged with the Iron Condor strategy will now have a 30% allocation in the Total Portfolio Solution. It’s the very same capital allocation it was before. It was 20% and 10% respectively and now it’s just 30%. That will allow all the same number of Iron Condor trades to be taken as well as all the exciting new option trades we’ve been learning with many more coming soon.
It’ll just be in a single strategy so everybody interested in options trading can get all the signals in one place, and anybody who isn’t ready for options trading yet can easily ignore a single strategy.
* But please continue to ask me your questions about options because I really do view it as an asset class of it’s own. In what appears to be the late stages of this bull market additional diversification is becoming increasingly valuable.
2) VTS Combined Volatility is our family of volatility strategies and we’re just moving back to three strategies like it was before our friend XIV was put to rest. Most people just choose one strategy to follow to keep things simple. They are all designed as stand alone strategies so just choose the one that best matches your risk tolerance and investing style.
VTS Conservative Vol as the name suggests is the safest. It not only takes a smaller amount of trades (roughly 45% of trading days) but it also trades the ZIV / VXZ combo which moves a little slower than the other products.
VTS Aggressive Vol takes a higher number of trades (roughly 70% of trading days) and will always use the more aggressive volatility products available. Currently that means the SVXY which is now a 0.5x leverage product but I’m sure in the future more will become available again and this strategy will use the more aggressive ones whenever possible. In good times that will of course mean better performance. In rough years though like 2018 more trades is less advantageous so there is always a trade off. Higher absolute performance with larger drawdowns though is what I expect.
VTS Tactical Volatility is now making it’s triumphant return after a several month layoff. Instead of replacing the XIV with a different product, we will be simulating that position entirely through long only single leg options. I’ve put together two videos already explaining stock replacement that I will link below, and I’ll also remake the Tactical Volatility strategy video with the updated changes soon.
This may allow a few people who have previously been restricted from owning the ETFs directly to perhaps access them. Everyone will be in a different situation though so you’ll still have to contact your broker and see if long puts and long calls on VXX are available to you.
* This strategy is positioned in the middle of the risk tolerance spectrum. It’s active roughly 50% of the time to keep frequency down, but it will be using roughly 0.7 delta options making it a little more aggressive than the ZIV.
Stock Replacement Part 1:
Stock Replacement Part 2:
Markets close early today and will be closed all day tomorrow for the 4th of July. When we return on Thursday the “daily trade signals” section down below will reflect the changes.
Markets are having a very difficult time choosing a direction in 2018, especially with the possibility of trade war talk on a moments notice, but regardless we are focused and ready for whatever is coming next.
Have a great 4th of July!
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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