Volatility Trading and using Stop-Losses
Anybody who’s followed the daily performance of these volatility ETPs will very quickly realize they do occasionally suffer significant losses. Our Conservative Vol strategy that invests with the ZIV and VXZ less so, but for both the Tactical Volatility strategy as well as the Aggressive Vol strategy (that use the XIV and SVXY respectively) it’s not uncommon at all to see those products suffer double digit single day losses.
Implementing a daily stop-loss seems like the obvious solution to the risk problem, so in this video I will go over some statistics of past daily drawdowns and see if we can shed some light on the issue.
As you’ll see in the video, there is no right and wrong answer and this is intended as an open ended discussion. If you have follow up questions, I’d be pleased to talk about this further with you so feel free to ask me anything.
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