Trading Volatility

2026 Stock Market Survival Guide

2025-09-30T10:43:00.000-07:00

Labor Demand and Supply Under Pressure

The labor market is flashing unmistakable signs of strain:

August payrolls rose by just 22,000 jobs, the weakest monthly gain since the pandemic recovery period.
Unemployment climbed to 4.1%, the highest since 2021.
Prior months were revised downward, while goods-producing sectors in particular are showing contraction.

Looking ahead, firms are signaling caution. With cost volatility from escalating trade tensions, companies are leaning into restrained hiring, performance-based layoffs, subdued wage growth, and lower entry-level pay. We anticipate job creation will continue to weaken into 2026, with unemployment likely rising toward 4.8% by early next year.

For markets, this marks the early stages of a labor downshift driven not only by cyclical factors but also by structural disruptions from AI and automation.

Consumers: Resilient, But Eroding Fundamentals
Household spending has thus far defied the labor slowdown, but cracks are forming:

Retail sales rose 0.6% m/m in August, boosted by back-to-school shopping and activity among higher-income households.
Real volumes, however, grew only modestly, as tariffs and rising prices weigh disproportionately on lower- and middle-income households.
Tariff-induced price hikes are now filtering through, threatening to erode purchasing power.

While income gains have supported spending to date, the fundamentals are softening. Real personal consumption growth expected to decelerate from 2.8% in 2024 → 1.9% in 2025 → 1.2% in 2026, leaving consumption far more vulnerable to labor market weakness.

Inflation Reaccelerates
The August CPI confirmed a renewed acceleration in inflation:

Tariffs are beginning to lift goods prices, though passthrough remains gradual and uneven.
Service inflation stayed firm, driven by higher travel costs and a rebound in shelter.
Inflation momentum is broadening across both goods and services.

Looking forward, core PCE inflation to drift to ~3.2% by year-end, well above the Fed’s 2% target. Sticky inflation alongside labor weakness represents a difficult policy tradeoff: cut too soon, and inflation risks re-anchoring; stay tight too long, and the labor market damage deepens.

Read the rest of the article on Substack at https://tradingvolatility.substack.com/p/labor-market-weakens-inflation-reignites

How To Immediately Improve Your Options Trading

2023-08-31T16:31:00.002-07:00

Most people fail at the basics of trading options

In the fast-paced world of financial markets, options trading has gained tremendous popularity. The allure of potentially significant profits is undeniable, but the harsh reality is that many traders end up losing money due to a variety of factors. While trading options inherently involves risk, one of the major culprits behind losses is often the choice of a subpar trading platform. In this article, we'll delve into why selecting the right trading platform matters and how making the switch to Options AI can be a game-changer for your options trading journey.

Understanding the Importance of a Good Trading Platform

Why does your choice of trading platform play such a pivotal role in your trading success? A trading platform is where you analyze market data and manage your portfolio. A bad platform can lead to misunderstandings, confusion, and ultimately poor decision-making, leading to losses.

Visualize and Mitigate Risks with Options AI

Options AI understands that effective options trading requires clear visualization and risk assessment. One of the standout features of Options AI is its ability to help users visualize trades and comprehend the inherent risks. Through intuitive tools and visual representations, traders can gain a clearer understanding of how their chosen options positions may perform under various market scenarios. This empowers traders to make informed decisions and manage their risk exposure more effectively.

Highlighting the True Costs with Options AI

The Options AI platform goes beyond superficial option costs by providing insights into how much of a price move is already factored into the option premium. This transparency is essential because it helps traders assess whether an option is overpriced or underpriced relative to the expected market movement. Armed with this knowledge, traders can fine-tune their strategies and make more accurate predictions.

Beyond the Basics: Strategies and Expertise

Options AI distinguishes itself by catering to a diverse array of strategies that go beyond simple call and put buying. The platform is designed to generate trading strategies which offering a broader range of probabilities and profitability. Whether you're interested in spreads, straddles, or iron condors, Options AI provides the framework to explore and execute these strategies with confidence.

Awards Speak Louder Than Words

Recognition from industry experts speaks volumes about a trading platform's quality. Options AI proudly took home the title of "Best Brokerage for Options Trading" at the Benzinga FinTech Awards in 2022. This accolade underscores the platform's excellence in empowering traders to navigate the intricate world of options with precision.

Final Thoughts

The path to success in options trading hinges on the right tools and the right platform. By switching to Options AI, you're gaining a comprehensive solution that facilitates better visualization, risk assessment, and strategy of your trade ideas. Options trading is inherently challenging, but with the right platform like Options AI, you can significantly increase your chances of turning the tide in your favor. It's time to take your options trading journey to the next level.

You can use this link to obtain a special promotion of a free moth of trading on their platform.

Simplify Your Trading: Join Our High-Performing Indicator Subscription Now

2023-06-12T17:48:00.001-07:00

Trading Volatility recently celebrated 10 years of providing indicators for volatility ETPs (SVIX, XIV, SVXY, VXX, UVXY, UVIX) to retail traders and professional fund managers.

Through the use of our indicators, we have been able to capitalize on changing market dynamics, including the great bull runs of 2016 and 2017, the 2018 "volmageddon" event, and the 2021 pandemic panic.

2023 has been another successful year for shorting volatility. So far, our indicators have outperformed nicely (through June 12) with four SVIX trades.

Our VRP+VXX Bias: +94%
SVIX (buy and hold): +69%

This performance was driven by 4 trades (one still in progress), with statistics captured below.

Over the past decade, we have repeatedly written about our volatility strategy and why we believe it is superior to any other trading strategy out there. It is worth reiterating here:

We place swing trades, which amount to ~20 trades per year.
We focus on the single asset class of volatility ETPs: $SVIX (inverse volatility) and $VXX (long volatility).
Our strategy is relatively easy to replicate with automated preliminary notifications sent at 3:46 pm ET when we are about to place a trade at the close.
The investment vehicles are highly liquid, making it easy to trade in size without causing significant market impact.

Sounds promising. Are there any considerations to keep in mind?

High reward comes with high risk. As you may have heard volatility ETPs can exhibit volatility themselves.
It is crucial to take prompt action upon receiving a trade alert, particularly after a sell signal, to avoid substantial drawdowns.
Psychologically, executing trades consistently can be challenging for many individuals.

Many investors tend to overcomplicate trading, bombarded daily by the latest stock trends, thinking they can profit by chasing memes.

If your performance is lagging and you seek to simplify your trading approach, now is an opportune time to reflect on your strategy and make necessary adjustments. For more information, please visit our Strategy page.

We have extensively discussed why we favor volatility ETPs. This preference stems from their trading mechanism based on ever-shifting VIX futures weighting and their performance influenced by term structures. Since this concept may be unfamiliar to many, we have provided comprehensive write-ups and even offer a free e-book, along with the #1 rule for volatility ETPs.

To explore our subscription options, please visit our Subscribe page. Given the valuable information provided, our subscription prices are remarkably affordable. Additionally, for those hesitant about long-term commitment, we offer day passes with full access to our site for as little as $5/day.

All in all, this year has been remarkably fruitful, and we eagerly anticipate what the future holds. Join us on our journey and witness firsthand the incredible potential our subscription offers. Subscribe now and embark on a path to trading success!

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Hypothetical and Simulated Performance Disclaimer
The results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Hypothetical and backtest results do not account for any costs associated with trade commissions or subscription costs. Additional performance differences in backtests arise from the methodology of using the 4:00pm ET closing values for SVXY, VXX, and ZIV as approximated trade prices for indicators that require VIX and VIX futures to settle at 4:15pm ET.

Looking For The Short Volatility Trade After +170% Year-To-Date

2020-03-22T14:08:00.001-07:00

Markets have been made historic moves during these first few months of 2020. Here at Trading Volatility we have stayed focused on following the process of our trading systems to get off to an amazing start on the trading year.

Here is the performance of our indicators in 2020, through March 18th, as tracked by a third party (Collective2):

- VRP+VXX Bias: +170%

- VXX Bias: +238%

Subscribers to these blog posts have known since last September that something like this was coming, as I outlined in "The Once-A-Decade Volatility Trade" post. In that article I wrote

"Your opportunity is to join us now because once the next volatility spike it's too late. Our gains will be made and those without hedges in place will have lost. It's that simple."

I'm sorry to say that it is now too late for non-subscribers to capture the full extent of this move.

However, there is still an opportunity to capture additional gains on upside from a long volatility trade (via VXX, UVXY, or TVIX) as well as "The Once-A-Decade Short Volatility Trade" which will happen after this current volatility spike runs its course.

In fact, as I've previously written in my Market Crash Protection post, our indicators successfully identify times when the market is strong and it is appropriate to short VXX (or buy an inverse ETF such as SVXY or the much-anticipated SVIX). The short volatility side of the trade is historically where most of our gains come from.

2020 has been a big year on the long volatility side of the trade and I expect it to be just as big on the short volatility side of the trade as we make our way through the Coronavirus (COVID-19) crisis.

These are difficult times and I believe that our automated trading process can be an enormous benefit to anyone who wants to be able to filter out the noise and emotional pitfalls of trading in this market.

As you know, I was not exaggerating when I said we will have the "Once A Decade Volatility Trade" and I am not exaggerating when I say we will have "The Once A Decade Short Volatility Trade."

Join us as a Trading Volatility+ subscriber so this next opportunity doesn't pass you up.

You can view what we offer to subscribers at our Subscribe page. Considering the information you get from our service, our subscription prices are actually ridiculously cheap. And for those who are afraid of commitment, we offer day passes with full access to our site for as little as $4/day.

To learn more visit our Strategy page. You can also view all the trades that our strategies have generated over the years by looking at the spreadsheets on the Results page or links to Collective2. We strive to be as transparent as possible with our service.

Free E-book:

If you'd like to learn more about our how volatility ETFs work you can read our free e-book, Fundamental Concepts and Strategies for Trading Volatility ETPs, which is available for free download. If you are curious about how our Bias forecasts work and why they have been successful in identifying long-term trends under a variety of market conditions, be sure to give this a read. It explains the basic concepts of VIX and VIX futures as well as the main price drivers of various volatility ETPs, including the popular funds VXX, VIXY, SVXY, UVXY, ZIV, and VXZ. I believe that the concepts outlined in the e-book are critical to understand if you're going to trade these products.

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Hypothetical and Simulated Performance DisclaimerThe results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Hypothetical and backtest results do not account for any costs associated with trade commissions or subscription costs. Additional performance differences in backtests arise from the methodology of using the 4:00pm ET closing values for SVXY, VXX, and ZIV as approximated trade prices for indicators that require VIX and VIX futures to settle at 4:15pm ET

Intro To Using The Volatility of Volatility Index (VVIX)

2019-10-08T11:14:00.000-07:00

Many people have some knowledge of the VIX, the volatility index for the S&P 500. It provides a measure of the expected volatility of the S&P 500 over the next 30 days. It is widely covered by financial media and cited extensively, especially during market sell offs when it is often referred to as the "fear gauge" since it tends to spike higher as the S&P 500 moves lower. (Those new to VIX can read all about it on Investopedia).

However, not many people know about VVIX, which is the volatility index for VIX. Using similar methodology, VVIX provides a measure of the expected dispersion of the VIX over the next 30 days.

On Sept 20th I tweeted this chart about VVIX, which identified concerns about the market. Most people, including traders who spend a great deal of time in the volatility world, pay little or no attention to VVIX. However the gauge is actually quite useful to those who take the time to study its behavior and I'll discuss a couple of entry-level points in this post.

I like to refer to VVIX as the "panic gauge" since it tends to spike to its highs as the VIX moves higher. Generally VIX and VVIX move in the same direction, but when VVIX diverges from VIX it can provide useful information about market conditions. I'll provide some examples of what to look for using the following weekly charts which show the S&P 500 (top graph), VIX (middle graph), and VVIX (bottom graph) over the past 30 months.

First note how VIX and VVIX are generally moving the opposite direction of the S&P 500. This is by no means a law and it is quite possible that all could move the same direction (that explanation will have to be a topic for another day). However it is always important to note when the indices are not moving in their typical inverse correlation manner so that the behavior can be explored.

I've circled recent S&P 500 highs (Jan 2018, Sep 2018, Apr 2019, Jul 2019, and Sept 2019) in blue and lined up the corresponding VIX and VVIX values (yellow lines). I've also used green support lines to indicate times where SPX, VIX, and VVIX are diverging from their typical behavior.

Note that at most of these times where SPX was at or near all-time-highs, VIX and VVIX were near recent lows. But the subtle difference in Sept 2019 was a VVIX at 100 is roughly 25% higher than it should have been given S&P 500 highs and a VIX of only 15.

That 25% difference in VVIX (a reading of 100 versus an 80) is not trivial and has a specific and direct impact on the price of VIX calls by nearly doubling their price. So what we had the week of September 16th were large investors showing up to pay a 90% premium for portfolio hedging via VIX calls (this premium was demanded by sellers of the VIX calls), and thus the reason for concern.

VIX spiked 40% and the S&P 500 fell nearly 5% over the following 2 weeks after I posted the VVIX chart.

Another way, VVIX can be useful in detecting tradable market bottoms. When VVIX does not confirm with higher highs while VIX moves higher, it is often a sign that panic is subsiding and large buyers are stepping in (see dashed line at Dec 2018). As VIX spiked higher to 35, VVIX diverged from its October peak of 150 and only reached a December high of 112. This was a signal that investors had already sufficiently hedged their portfolios and VIX calls were no longer in demand, i.e., the "panic" was over although "fear" was still elevated.

There are many nuances around VVIX which require close inspection. You can look specifically at the implied volatility on VIX options to gain additional insight whether VIX is skewed to the upside or downside. This can be done by looking at your broker's option data or by looking at the data on our new (Free) Skew Charts Page. As an example, the current VIX skew looks like this. showing a high premium for upside VIX calls.

I invite you to visit the page and look at the current VIX skew or skew for any other stock with options. As always don't hesitate to Contact Us with any questions.

Don't Fight The Fed?

2019-09-19T14:43:00.002-07:00

Ex-Goldman Sachs CEO, Lloyd Blankfein, felt compelled to hop on Twitter yesterday to remind people of this investing platitude.

The assumption by most readers is that he is referring to being long or short the stock market. However, you would be deeply mistaken (and poor) if you followed this adage and applied it to stocks.

Take five minutes and review the Federal Reserve's actions on interest rates since 1970 to see for yourself how useless it is against stocks.

Or, just take a look at the following chart which tracks the Federal Funds Rate vs the S&P 500 and decide if it makes sense to be short stocks when the Fed is raising rates, and be long stocks when the Fed is lowering rates.

If you need any more help, you can take a look at the follow chart which shows the Fed lowering rates from 2007 - 2009 vs the VIX.

Yes, that's right. If we apply this adage to equities you would buy stocks in Sept 2007 and keep on buying as the S&P gets cut in half and VIX spikes to 80 in late 2008.

I don't recommend you do this.

Instead, apply this adage elsewhere. As you can see from the chart below, this rule really only applies to bonds.

When the Fed is on a tightening course (that is, they are raising rates) don't be long bonds. You need to be short bonds since their prices fall as yields rise.

When the Fed is lowering rates, don't be short bonds. You want to be long bonds since their prices rise as yields fall.

The Fed Funds rate will generally line up pretty well with the U.S. 10-year bond's yield. As of yesterday the Federal Reserve set its rates to a range of 1.75 - 2.00% vs a 10-year yield of 1.77%. At this point we probably have to assume rates at headed back to at least the 0 - 0.25% range as the Federal Reserve does everything in their power to delay the next recession.

As for what we can expect from equities there is less of a guarantee. Generally rate cuts happen just before or during a recession and equities move steeply lower.

This provides further evidence for the setup of our Once-A-Decade Volatility Trade that we discussed last week. It is time to properly prepare your portfolio and be ready for this trade by applying smart tail-risk hedges.

For more information don't hesitate to reach out to us via the Contact Page or visit our Subscribe Page.

New Tool For Identifying Stocks Ready To Move Higher On A "Short Squeeze"

2019-09-15T09:43:00.003-07:00

At Trading Volatility, our main goal is to identify major trends in the market so that people can make trades using volatility ETPs. We focus on swing trades, which means making around 20 trades per year, to achieve better performance than the overall market. We use short volatility (SVXY) and long volatility (VXX) strategies.

Now there is a new tool available for people who prefer to look at unique opportunities in individual stocks.

Now, we have introduced a new tool for those who are interested in finding unique opportunities in individual stocks. It's called the "Gamma Exposure" (GEX) dashboard. This dashboard measures the Naive GEX of stocks by analyzing all the outstanding options contracts associated with them.

Naive GEX indicates the amount of shares that Market Makers need to buy or sell to maintain a neutral position in their trade book, based on certain assumptions. To understand the inner workings of Naive GEX, please refer to the explanation below.

The dashboard is updated throughout the day. I've been posting the dashboard results to twitter and to an automated email distribution list (which is currently free) for everyone to follow.

Be sure to check out all the new tools for individual stocks at http://stocks.tradingvolatility.net including Open Interest charts (Max Pain), Gamma Exposure Charts, Skew Charts, Dark Pool Interest charts, and Yearly Pivot Markers. Announcements on additional updates will be posted on this blog as these tools evolve.

Part 2:

Let's delve into the technical aspects to understand why "Gamma Exposure" (GEX) is significant:

Recent research has explored the concept of Gamma Exposure (GEX) related to the options market makers' positions.

In summary:

- Market makers play a crucial role by facilitating the buying and selling of options for traders.

- Market makers don't simply take the opposite side of investors' trades. Instead, they hedge their exposure to effectively manage their options portfolio and generate profits.

- These hedges need to be adjusted on a daily basis to maintain a neutral position as the prices of the underlying stocks fluctuate.

- In scenarios where "Gamma Exposure" gets off balance to the negative side, Market Makers must sell as prices drop and buy as prices rise, accentuating the movement in stocks. Oversold conditions result in a setup for a short squeeze, where both investors are buying oversold conditions AND Market Markets are re-hedging their positions by buying as the stock price rises. The result is a pop higher in the stock.

- Our leaderboard takes daily measurements for a fixed set of ~1,2000 stocks automatically.

What gets measured and displayed in the Dashboard:
- Our data looks at all options contracts with less than 94 days to expiration.
- "GEX(shares)" is calculated by summing gamma from calls at every strike (gamma * Open Interest * 100) and puts (gamma * Open Interest *-100).

- "GEX($) per 1% move" is given as "Naïve GEX" meaning that it is calculated under assumptions that Market Makers are buying calls and selling puts.

- A stock's Call Skew influences the "Skew Adjusted GEX" (SA-GEX), which changes to reflect estimated MM exposure. A positive Call Skew is common in stocks which have outsized speculative call buying. This is the approximation of how much stock MMs must buy/sell per 1% move in order to remain neutral in their positions.

- Positive Skew Adjusted GEX: Daily movement subdued as Market Makers re-hedge by buying as stock price falls, and adding to their short as stock price rises.

- Negative Skew Adjusted GEX: Daily movement accentuated as Market Makers re-hedge by buying as stock price rises, and adding to their short as stock price falls.

- "GEX/Volume" is the ratio for GEX (in shares) to the daily average trade volume (in shares). The more negative the GEX/Volume ratio the better the opportunity for a squeeze higher. This impact of this value is relative to the security's historical GEX levels.

- The "Flip Point" is the level where gamma changes from positive to negative, or vice versa.
- While above it, stock movement gets suppressed (Market Makers re-hedge by buying as stock goes lower, and selling as price moves higher).
- When below, stock moves are accentuated (MMs re-hedge by buying as stock goes higher, and selling as prices moves lower).

The Once-A-Decade Volatility Trade

2019-09-13T17:14:00.000-07:00

The once-a-decade moment that we as volatility traders look forward to is on the horizon and quickly approaching.

This is a significant change in the market. After all, the majority of our gains here at Trading Volatility have been made by betting on a decline in volatility by buying inverse volatility ETPs, SVXY and XIV, as can be seen in our past performance updates (2013, 2014, 2015, 2016, 2017, 2018 & 2019: see below). The easy money has been made by shorting volatility in this bull market.

The moment I'm referring to is the coming stock correction that has been set up by a a record 12-year bull market and driven volatility levels into the basement. After hitting a low of 8.56 in November 2017, the VIX has been putting in a higher base which now sits near 12.0.

At this point we need to shift gears and be ready for the big gains. I'm talking about the gains that come from being long VXX and often happen in a short period of time. As you can see in the charts below, October 2008 is the best example of what we're about to see (May 2010, Aug 2011, Aug 2015, Feb 2018, Oct 2018, and Dec 2018 are examples of "more ordinary" months with VXX trades). Most people in this market are greedy in buying stocks and now is the time to be looking at taking the other side of the trade and buying volatility.

Many people have disregarded the warnings about the yield curve inverting as a signal for a recession. However, the reality is that the yield curve has inverted (where 3-month bonds yields are higher than 10-year bond yields) in many countries across nearly every continent in a sign of global recession.

Dozens of Central Banks are doing their best to fight a recession and spur growth by cutting interest rates. The continuation of falling bond yields around the world, often into negative interest rate territory, signals a world of declining growth.

Corporate Insiders are selling their stock at a pace not seen since 2007 as doubts about the sustainability of these valuations grow.

THIS. IS. HAPPENING.

There's just one little problem though.

You can't just sell your stocks to move to cash, buy inverse ETFs or just buy VXX yet.

Why? Because the Federal Reserve still has the confidence of investors. There are rates to cut and Quantitative Easing to promise and/or deliver, which could drive stocks higher.

Or not. Maybe market participants get collectively concerned if the Fed sees the situation as dire enough to make big rate cuts and push liquidity into the system as they did in the 2008-2009 financial emergency? Perhaps we come to realize that the problem is rates are already low due to the inability to raise them from the emergency levels of near 0% set 10 years ago.

Since the timing for a stock correction is difficult to predict, what you can do now is diversify. Carve out a portion of your portfolio and dedicate it to protecting your gains through a form of "tail risk" insurance using volatility.

"Tail Risk" as most people think of it is generally a losing proposition that can be as simple as buying VXX, UVXY, or TVIX or as involved as buying rolling puts or selling calls on the S&P 500. This is quite simply, a terrible idea. It works maybe once every 10 years, but only to the extent that it would have been better to not do it all. There is a built in Negative Bias against volatility ETFs due to how they are designed -- it is precisely why VXX quickly lost 99% of its value 5 years after the time it was first launched in 2009.

Our form of Tail Risk protection is different because it is dynamically allocated:

When there is no immediate danger we are actually short volatility and collecting premiums from all those who are continuously buying protection. It generates gains.
Our indicators inform us each day on whether the likelihood of a spike in volatility is significant, and prompts us to move to cash or long volatility when necessary.
By doing this we don't spend money on portfolio hedging when it is unlikely to make money. We only hedge when necessary.

We've been providing services for applying dynamic volatility positions using strict rule-based decision making to investors for over six years now with an average annual gain of over 40% per year.

Our offerings have grown and are now used by people investing small $10,000 accounts and Financial Advisory managing $100,000,000+ in assets.

Your opportunity is to join us now because once the next volatility spike it's too late. Our gains will be made and those without hedges in place will have lost. It's that simple.

We make it as easy as we can for people to follow our strategies by sending automated signals change alerts, preliminary alerts, and daily summaries.

Check out what we offer to subscribers by viewing our Subscribe page. Considering the information you get from our service, our subscription prices are actually ridiculously cheap. And for those who are afraid of commitment, we offer day passes with full access to our site for as little as $4/day.

To learn more visit our Strategy page. You can also view all the trades that our strategies have generated over the years by looking at the spreadsheets on the Results page or links to Collective2.

Free E-book:

Day Pass Memberships Now Available for $5

2019-07-13T12:56:00.001-07:00

We understand that there are investors who don't have the need for a continuous monthly subscription. For some, the timing for buying and selling volatility ETFs is limited to particular moments where they see an opportunity arise and they are ready to make a trade. Other people just want to access to our set of volatility metrics on occasion when they perceive the market to be at a potential turning point.

I am pleased to announce that you can now purchase a Day Pass to Trading Volatility+ to gain full access to our members-only site at http://members.tradingvolatility.net/ on a non-recurring basis..

Day Passes will provide you with access to:
- The members' Daily Forecast page -- See the current day's indicators as well as the next day's indicators (after 4:33pm ET).
- The members' Intraday Indicators page -- View the indicator values as they update live during regular trading hours.
- Automated change alerts -- Receive an email if there is a buy/sell alert.

Day passes are available at our Subscribe page, with the option to purchase access for 1, 2, 3, 4, or 5 consecutive days (for which the market is open). Each Day Pass is valid from the time it is activated until 11:59pm ET.

Day Passes can be purchased for as low as $4/day**.

For those who may not be familiar with our services, we have offered subscribers a set of buy/sell indicators for volatility ETFs since 2013. Our superior returns were frequently hard to believe so we started having our performance tracked by a third party in 2016.

For more on how our indicators work and can be used, please see our Strategy page. Should you have any questions feel free to reach out to us via our Contact page.

**Pricing for day passes and monthly subscriptions is subject to change.

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Hypothetical and Simulated Performance Disclaimer
The results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Backtest results do not account for any costs associated with trade commissions or subscription costs. Additional performance differences in backtests arise from the methodology of using the 4:00pm ET closing values for SVXY, VXX, and ZIV as approximated trade prices for indicators that require VIX and VIX futures to settle at 4:15pm ET.

Market Crash Protection

2019-06-14T12:07:00.000-07:00

The VXX ETF often gets a bad rap. Throughout this bull market of the past ten years it has seemingly only declined.

But VXX is actually an incredibly useful security to own when equities decline. Consider:

- In February 2018, VXX gained 44% (measured month start to end)
- In Octiober 2018, VXX gained 40% (measured month start to end)
- In December 2018, VXX gained 36% (measured month start to end)

At this point you have to consider whether a decade-long trend is changing. Take a look at the price of VXX over the past two years:

Obviously there is significant movement in VXX and the key to making money off it is to have the ability to time entries and exits well. Enter our VXX Bias indicator...

Our VXX Bias indicator was first made publicly available in 2013 and has been tracked by a third party (Collective2) since 2016.

A snapshot of our results over that time (below) shows a gain of 348%, thanks largely to huge gains in VXX during the months where equities declined heavily. Specifically:

February 2018 (+36%),
October 2018 (+28%),
December 2018 (+21%).

But our strategy doesn't just excel when the equity market does poorly. That's because our VXX Bias signals when to buy VXX as well as when to short VXX. It successfully identifies times when the market is strong and it is appropriate to short VXX (or buy the inverse ETF, ticker SVXY).

Equally significant gains are made by shorting volatility. Specifically:

March 2016 (+25%),
May 2016, (+20%),
June 2016 (+34%),
January 2017 (+30%)

I wouldn't fault you for being skeptical of these results since they are outside the norm of what people are told is possible. Which is exactly the reason why I wanted to have the results tracked by a third party over three years ago. People like see actual trades and results. Our customers now include DIYers, Financial Advisors, and hedge funds.

If you look closely at the monthly returns you'll see that we also have months where the strategy does poorly. It should come as no surprise to you that trading is difficult and there is no strategy that works in all market conditions. We typically find ourselves struggling through choppy markets and sharp reversals. We do take losses, for this is not a magic money machine. Fortunately these episodes are relatively brief and our indicator is tuned to maximize profits over the long term.

It has been my honor to have helped thousands of subscribers over the past 6 years. From my initial post in Dec 2012 my mission has been to help investors navigate the use of volatility ETPs and enhance their portfolio returns. We look forward to helping others who can benefit from our expertise.

We make it as easy as we can for people to follow our strategies by sending automated signals change alerts, preliminary alerts, and daily summaries.

Check out what we offer to subscribers by viewing our Subscribe page. Considering the information you get from our service, our subscription prices are actually ridiculously cheap.

To learn more visit our Strategy page. You can also view all the trades that our strategies have generated over the years by looking at the spreadsheets on the Results page or on Collective2.

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Hypothetical and Simulated Performance Disclaimer
The results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Backtest results do not account for any costs associated with trade commissions or subscription costs. Additional performance differences in backtests arise from the methodology of using the 4:00pm ET closing values for SVXY, VXX, and ZIV as approximated trade prices for indicators that require VIX and VIX futures to settle at 4:15pm ET.

Professional Volatility Strategies

2019-04-05T13:48:00.000-07:00

Six years ago on this blog I wrote "XIV: When A "Sure Thing" Goes Bad, highlighting that the key drivers of Volatility ETPs are 1) the change in price of the relevant VIX futures contracts and 2) the term structure. While XIV no longer exists after last year's blow up, the message is still relevant to XIV's reduced leverage replacement, SVXY. In fact, an alternate title for this post could be "When a "Sure Thing" Goes Bad -- SVXY Edition"

Similar to XIV, SVXY is a fund that can be used as a play when an investor believes that volatility will decline. Although SVXY has only half the leverage that XIV had (-0.5x vs -1x), it can still produce strong gains and losses.

Below is a chart of the price of SVXY calculated as if it had the -0.5x leverage since 2004 (prices prior to the fund's official leverage reduction have been constructed by calculating the index value using 1st and 2nd month VIX futures data).

I've highlighted most of the larger price drops to help illustrate that SVXY is not a buy-and-hold security, even in its reduced leverage form. When the market structure changed in 2007 & 2008, SVXY still lost 70% of its value due to strong backwardation in VIX Futures.

As long-time readers know, the term structure of VIX futures is what drives various VIX funds, including SVXY, VXXB, UVXY, TVIX, VIXY, VIIX, and ZIV.

SVXY performs best in years where there is a strong and persistent contango, the condition where VIX is lower than VIX futures. The best way to measure the degree of contango for these products is to look at the weighted value of first and second month VIX futures as compared to spot VIX. Below is a graph of the weighted VIX futures values to spot VIX over the past 11 years.

The trendline here provides a way to filter out the daily noise and allows us to verify that the years in which SVXY performed the best experienced the largest and most persistent contango. On the flip side, the time frames that SVXY performed badly experienced backwardation and/or a small contango.

The fact that the term structure is such a strong driver of VIX ETPs is why professionals track this data closely. We track VIX Futures data and associated metrics shown on our website and use information from the term structure, price momentum, historical volatility, and the volatility of the VIX as inputs to our automated algorithms for buying and selling. The algorithm values are then used to trigger automated buying and selling of VIX ETPs and are emailed to subscribers. We track this data intraday as well and post it to both our Intraday Indicators page as well as our Daily Forecast page.

Our results (as tracked by a third party) substantially beat the S&P 500 over the long term. A screenshot of the VXX Bias and VRP+VXX Bias since we began tracking them on Collective2 are shown below:

VXX Bias:

VRP+VXX Bias ("Trading Volatility 1"):

Over the long term our approach can do well in both bull and bear markets, as seen in by our hypothetical backtest summary.

Clearly not all years are huge winners but the data shows that the use of the term structure data tends to be extremely valuable. If you are interested in checking out what we offer to subscribers you can view our Subscribe page.

One more note: We made a change to our VRP indicator in January 2019 so that it can now be used as a standalone strategy. As such, I am now having Collective2 track that as well. It can be found under Enhanced VRP.

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Hypothetical and Simulated Performance Disclaimer
The results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Backtest results do not account for any costs associated with trade commissions or subscription costs. Additional performance differences in backtests arise from the methodology of using the 4:00pm ET closing values for SVXY, VXXB, and ZIV as approximated trade prices for indicators that require VIX and VIX futures to settle at 4:15pm ET.

Fidelity Lifts Restrictions On SVXY

2019-02-14T14:37:00.000-08:00

After prohibiting SVXY as part of fallout from the XIV blow up last year, Fidelity is now allowing people to purchase inverse volatility funds provided they complete a one-time Investment Disclosure.

After attempting to place the order, you will need to read their disclosure and check a box to indicate that you agree.

After that you can trade SVXY there as before in either retirement or cash accounts.

Other brokers have lifted restrictions as well so it may be worth checking yours as well if you previously faced issues with inverse volatility ETNs.

Barclays To Replace VXX With VXXB

2019-01-23T09:59:00.000-08:00

As planned in the original VXX prospectus from its launch in 2009, VXX will be delisted as a security next week on Jan 30, 2019. Barclays has issued the replacement, VXXB, which is currently trading and is essentially identical to VXX.

To help with the transition, Barclays has published a VXX/VXXB comparison sheet as well as guidance around the transition process.

We have been keeping an eye on the outstanding number of ETNs for both VXX and VXXB over the past month. Very little progress has been made in the transition and VXX continues to hold about 3x the assets of VXXB, with VXX holding $921M as of yesterday.

If VXX's market cap does not come down substantially by Jan 28 there exists a potential for a temporary volatility crash on Jan 29 through Jan 30 as Barclays will need to pay cash out to holders on VXX on Jan 30.

However, as outlined in the guidance document, there exists an option for larger investors to take no action and simultaneously sell positions in VXX and buying equivalents in VXXB and may happen in the last days of VXX trading. This would be the smoothest transition route but it is not clear the percentage of holders will be utilizing this option.

Market Trends Point To Another Year of Volatility in 2019

2018-11-26T12:47:00.000-08:00

Navigating the stock market in 2017 was easy. Shorting volatility was easy money. Picking individual stocks was easy and everyone was a brilliant strategist.

Then came 2018. The graph below highlights the fact that while less than 2% of assets were negative in 2017, 90% of assets are negative YTD in 2018 -- they highest percentage since... ever.

In another stark contrast to 2017, the short volatility ETPs have lost over 90% of their value in 2018 thanks to February's historic volatility spike. Last year's buy-and-hold everything strategy has been a bust across the board in 2018.

One of the few assets that lost in 2017 was volatility. Unsurprisingly, volatility has been one of the few bright spots in 2018 with the VIX index gaining +74% YTD and VXX +32% YTD.

What sort of market trends appear to be happening now and on tap for 2019?
- decelerating corporate earnings [now]
- late stages of the corporate debt cycle [now]
- decline of demand for U.S. Treasuries [now]
- quantitative tightening [now]
- slowing global growth [now]
- trend of de-dollarization [now]
- eventual reverse to more quantitative easing [late 2019]

That's a recipe for another difficult year for a range of assets with a strong possibility of wide movements within the equity markets as the year progresses. As we stated three years ago, traders need data-driven, reliable, observable, and easy-to-follow trading rules in order to set themselves up for consistent success. One of the reasons that 90% of people fail to make money at trading is they fail to have a process-oriented trading plan. As the saying goes, "Plan the trade. Trade the plan."

We think that volatility will again be a major factor within the markets in 2019. Our playbook to make money on short-term investing opportunities is to maintain a quantitative-driven investment process for volatility ETPs that has made us successful for the past 7+ years. Specifically, our VXX Bias and VRP indicators.

Why? Because they perform exceedingly well over the long term by trading both long volatility using VXX (soon to be replaced by VXXB) and short volatility using SVXY (previously using XIV).

We've previously noted that 2018 has given us trouble and that hasn't changed much since July. Our automated trading performance as tracked by a third party now stands at -22% for VRP+VXX Bias and +33% for VXX Bias. While the year is not yet over, those numbers are lagging average performance in most years. However, when the average annual return is north of 50% per year under a range of varying market conditions with best performance occurring during market drawdowns, it makes sense to stick with a good thing.

We take the guesswork out of the investing equation with a solid set of objective tools to guide decision making. At Trading Volatility our algorithms conduct daily monitoring of a variety of volatility-related data to generate our VXX Bias and VRP indicators which provide us with objective information about the likely direction of volatility ETPs, including VXX, VXXB, UVXY, TVIX, SVXY and ZIV.

Our algorithms continuously measure market data throughout each trading day and publish results on our subscribers' Intraday Indicator page. Our automation also emails and publishes the indicators' final values at the end of each day so that subscribers' can track the indicator of their choosing and act accordingly.

If you find yourself struggling in this market check us out. Stop guessing what will happen and sign up for our daily data-driven indicators for volatility ETPs. To learn more visit our Strategy page and Subscribe page or drop us a line via the Contact page.

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Hypothetical and Simulated Performance Disclaimer
The results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Backtest results do not account for any costs associated with trade commissions or subscription costs. Additional performance differences in backtests arise from the methodology of using the 4:00pm ET closing values for SVXY, VXX, VXXB, and ZIV as approximated trade prices for indicators that require VIX and VIX futures to settle at 4:15pm ET.

A Visualization of VIX Implied S&P 500 Movement

2018-10-25T11:08:00.000-07:00

U.S. Equities have taken a hit in the first four weeks of October with the S&P 500 declining as much as -9%. The VIX has risen ~108% this month up to 25.23 as of the close yesterday.

As we have noted previously, a VIX of 25 seems a bit low given the magnitude of the daily movements. Below you can see daily S&P 500 returns and their corresponding VIX values on the big sell-off days 10/10/18 (-3.3%) and 10/24/18 (-3.1%).

Based on this historical data, we could reasonably expect VIX to be trading in the 30-45 range. However, the market is apparently not expecting large rallies over the next month.

Recall that the VIX is an expression of expected annualized market volatility over the next 30 days. A VIX of 25 means annualized move (up or down) of 25%. That value can be converted to monthly terms by dividing by the square root of 12, which yields an expected dispersion of the S&P 500 of 7.2%, or an implied range of 2463-2848.

We can convert that to a weekly and daily basis as well (divide by the square root of 52) to get a weekly dispersion of 3.5%, giving an implied range of 2558 to 2748 from yesterday's close. Interestingly, the 1-week dispersion target for $SPX based on $VIX after Oct 11th was 2820 (it came as high as 2817).

So perhaps $VIX isn't "too low" based on the magnitude of moves. Instead, it's more that investors don't expect a swift rally. Charting out the implied dispersion we can visualize the market's short-term expectations:

We can expect VIX to adjust accordingly as S&P 500 rises and falls. I'll provide updates within the Twitter thread on the subject.

Have You Become Part of the Buy-and-Hold Equity Herd?

2018-09-14T15:38:00.000-07:00

What is your investing game plan?

Has the S&P 500's longest bull market in history, with its 336% gain, finally converted you to become a part of the buy-and-hold equity herd?

Do you think the U.S. equity market is now immune from the carnage we've seen recently in Emerging Markets (MSCI Emerging Market Index is now off 20% from the January highs)? Have you cast aside the idea of a balanced investment portfolio?

You probably don't want to even think about it, but this bull market will not last forever.¹ There will be an equity bear market here in the U.S. Non-diversified investors risk facing losses similar to that of the 2000 dot com bust and the 2008 financial crisis. The trap is that we don't know when. Any perma-bears left are still taking on losses, ineptly sitting in cash, or getting crushed by cryptocurrencies.

I personally like an aggressive Modern Portfolio Theory portfolio with a heavy weighting on equities -- but with one important modification. I like to carve out a small portion of my portfolio and allocate it to process-driven volatility trading which is long volatility at times and short volatility at other times.

This is the concept of including volatility as an asset and there are right and wrong ways to do it.

- Wrong way #1: Buy-and hold a short volatility ETP.
XIV, which was the short volatility ETP of choice, suffered a catastrophic hit in February 2018 and investors lost hundreds of millions of dollars. Prior to going bust, XIV was the "can't lose" fund that returned over 10x since inception in 2010. Many people lost nearly all of their investment and various professional money managers were fired because they didn't know what they were doing and ignored the trouble signs of the underlying assets (VIX Futures). The calamity was so bad, that some brokers banned the purchase of short volatility ETPs to try to protect the average investor (a bit late for that, don't you think??).

- Wrong way #2: Buy-and-hold a long volatility ETP.
If buy-and-hold of the short side of volatility is wrong, then it must be better to buy-and-hold long volatility ETPs, such as VXX? No. VXX and the 2x leveraged UVXY & TVIX ETPs suffer long term decay thanks largely due to the fact that these funds track VIX Futures that are most often in a state of contango. Without getting technical, it should be sufficient to point out that VXX has gone from over $100,000 (adjusted for multiple reverse splits) to $27 over the course of its lifespan since inception 9 years ago.

- The Right Way #1: Our VRP+VXX Bias indicators.
Our volatility indicators put us in cash, long volatility, or short volatility based on daily measurements of various components within the volatility market in order to provides us with a "flexible" fifth asset (the others being equities, bonds, real estate, and commodities). To take diversification one step further, our volatility trading indicators are comprised of multiple unrelated component indicators. No single indicator is perfect and ours are no exception. When they don't agree on what to do we move our volatility allocation to cash (this by the way, is how we survived the February volatility market imploded).

One really nice aspect of our VRP+VXX Bias algorithms, in addition to being fully automated, is that they get us invested in an asset that is non-correlated with other assets. This is key to good diversification within a portfolio. Why? Because if you are diversifying using an asset that has high correlation to another invested asset, you are diversifying in name only while both assets carry roughly the same performance.

The flip side of the non-correlated asset coin, however, is the fact that there will be times when our indicators lag the market. 2018 has been pitiful so far and this can be frustrating if you are not looking at the big picture. And that is, a properly diversified and properly balanced portfolio will excel long term.

At any given time there will be a lagging asset within a diversified portfolio. Smart investors don't just scrap an asset class after a bad month/year -- they rebalance and focus on their process knowing that the next year is likely to result in an entirely different outcome. Otherwise, the investor is left with a portfolio that carries less diversification, greater risk, and a lower long-term return potential.

Our indicator's performance speaks for itself with actual automated signals and trades tracked by a third party since 2016, Collective2, here:

Looking further back using our modeling, we can see how VRP+VXX Bias ("Trading Volatility 1" performs in a variety of market conditions. By far, the best performing years for our indicators are when strong equity drawdowns occur, as can be seen in the chart below.

Trading Volatility+ subscribers have access to our VRP and VXX Bias indicators, our intraday indicator data, receive emails with preliminary and final change alerts for each of the indicators as well as our daily summaries, and interact with our private community of volatility traders in the forum. If interested, you can learn more about our services on our Subscribe page.

As always, each day's indicator values, buy/sell triggers, trade performance summary, and equity curves are tracked in the spreadsheets linked at the bottom of our Subscribe page. Additional information on our trading strategy and indicators can be found on our Strategy page.

Our indicators are also utilized by a volatility investment fund that is open only to accredited investors. If you think a managed volatility fund might better fit your needs please send a message through the Contact page.

Footnotes:
¹ Smart people like to pretend they know why this bull market will end: the end of fiscal stimulus, rising interest rates, inflation, deflation, stagflation, global recession contagion, too much debt, high P/E ratios, trade wars, etc. No one knows the why or when and the average investor is unlikely to guess the when, and how it plays out, and be able to invest appropriately.

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Hypothetical and Simulated Performance Disclaimer
The results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Hypothetical and backtest results do not account for any costs associated with trade commissions or subscription costs. Additional performance differences in backtests arise from the methodology of using the 4:00pm ET closing values for SVXY, VXX, and ZIV as approximated trade prices for indicators that require VIX and VIX futures to settle at 4:15pm ET

Our Indicators Performance Update - YTD Through July 2018

2018-08-01T13:04:00.000-07:00

After a strong 2016 (+96%) and 2017 (+126%), our performance in 2018 has been rather lackluster so far.

The biggest difference between this year and previous years is that the short volatility trade isn't working well. We've generally seen small roll yields, choppy market conditions with strong whipsaw reversals, and a VIX that closed the first day of the year with a record low close of 9.77 (47% below the median close on the first day of the year). As you can see in the graph below, the short volatility trade (via buying SVXY) has generally contributed between plus and minus 10% to performance of both indicators all year.

The long volatility trades (via buying VXX) helped the performance for the VXX Bias with YTD returns briefly exceeding 100% after February's historical VIX spike. Despite the initial success however, both VRP+VXX Bias and VXX Bias indicators gave back most of their long volatility gains after February, as shown in the graph below.

Putting both the long and short volatility trades together for 2018 we arrive at the following YTD performance (through July):

VRP+VXX Bias: -19%
VXX Bias: +37%
VRP: -93%
SVXY (buy and hold): -89%

This year's journey can be viewed in the equity curves below:

As we did during 2016 and 2017, we continue to send our automated trade alerts to Collective2's auto-trading platform. Below is how our indicators performed, as tracked by Collective2 (performance values and graphs here date back to launch in February 2016).1

Overall, I've been very happy with how the indicators have performed since they were launched on our website back in 2013, but this year has certainly been slow so far -- especially over the last four months.

As usual, I've updated the values for monthly returns and they have been updated on our Strategy page, as well as below.

Note: Trading Volatility+ subscribers have access to our VRP and VXX Bias indicators, our intraday indicator data, receive emails with preliminary and final change alerts for each of the indicators as well as our daily summaries, and interact with our private community of volatility traders in the forum. If interested, you can learn more about our services on our Subscribe page.

As always, each day's indicator values, buy/sell triggers, trade performance summary, and equity curves are tracked in the spreadsheets linked at the bottom of our Subscribe page. Additional information on our trading strategy and indicators can be found on our Strategy page.

1Note: As mentioned in our previous post, you will find differences between the ideal/hypothetical indicator performance and actual trading performance for the following reasons:
- The VRP+VXX Bias indicator ("Trading Volatility 1" on C2) was launched on C2 on Feb 2, 2016.
- The VXX Bias indicator was launched on C2 on Feb 19, 2016
- Both C2 systems traded only 72%-80% of portfolio equity until April 1. After April 1, both C2 systems trade at ~97.5% portfolio equity (the ideal/hypothetical model portfolios trade at 100% equity).
- The ideal/hypothetical performance does not account for trade commissions or subscriptions costs.

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February YTD Performance of Our Volatility Indicator

2018-03-14T14:06:00.000-07:00

2018 has gotten off to a wild start in the volatility world as volatility exploded higher in early February. The VIX Index recorded a new all-time 1-day gain of 115.6%, followed by a new all-time 1-day loss of -58% on the following day. This resulted in quite a bit of carnage, completely destroying XIV and causing large losses in SVXY.

Below are the equity curves of all strategies YTD 2018, compared to XIV (SVXY).

Our VRP+VXX Bias indicator has taken a hit, with a -6% return after the first two months of the year. The picture looks a little bit worse on Collective2 due to some platform execution errors.

VXX Bias outperformed with a buy of VXX in mid-January, reaching unrealized gains of over 100% YTD before giving quite a bit back to end February at +46%.

SVXY obviously took a hit and is -90% YTD. The standalone VRP strategy got caught holding SVXY/XIV and is tracking at -90% as well.

Cumulatively, VRP+VXX Bias has recorded a +201% gain since we started tracking performance by a third party in February 2016. Meanwhile VXX Bias had a large leap and is now +345% since launch on Collective2.

The "Trading Volatility 1" system is the auto-traded version of our VRP+VXX Bias indicator which we have published daily to Trading Volatility+ subscribers for nearly five years now.

Trading Volatility+ subscribers have access to our VRP and VXX Bias indicators, our intraday indicator data, receive emails with preliminary and final change alerts for each of the indicators as well as our daily summaries, and interact with our private community of volatility traders in the forum. If interested, you can learn more about our services on our Subscribe page.

As always, each day's indicator values, buy/sell triggers, trade performance summary, and equity curves are tracked in the spreadsheets linked at the bottom of our Subscribe page.

Additional information on our trading strategy and indicators, including the updated monthly performance tables, can be found on our Strategy page.

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Hypothetical and Simulated Performance Disclaimer
The results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Hypothetical backtest results do not account for any costs associated with trade commissions or subscription costs. Additional performance differences in backtests arise from the methodology of using the 4:00pm ET closing values for XIV, VXX, and ZIV as approximated trade prices for indicators that require VIX and VIX futures to settle at 4:15pm ET

SVXY and UVXY To Be Re-Purposed Feb 28

2018-02-26T20:51:00.001-08:00

Another big news item dropped in the volatility ETP world today. This one from ProShares, who is reducing target exposure for SVXY and UVXY.

Effective 2/28/18:

$SVXY will be a -0.5x volatility fund (previously -1x)

$UVXY will be a 1.5x volatility fund (previously 2x)

This is a similar move to what VMIN & VMAX announced earlier Monday. But while VMIN/VMAX kept their exposure at 1x and moved the duration of VIX futures out ~60 days, SVXY is just reducing its daily movement by half.

As I mentioned in my other post today, this is a more sensible way for a short volatility play. My main gripe is that SVXY went all the way down to -0.5x instead of something like -0.75. The reduced daily movement makes SVXY less attractive as the short vol ETP of choice, but it's nice that you can still buy options against it.

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ProShare Capital Management LLC Plans to Reduce Target Exposure On Two ETFs

Bethesda, MD (February 26, 2018) – ProShare Capital Management today announced that the investment objective of two of its ETFs will change effective as of close of business on February 27, 2018.

ProShares Ultra VIX Short-Term Futures ETF (NYSE Arca: UVXY) will change its investment objective to seek results (before fees and expenses) that correspond to one and one-half times (1.5x) the performance of the S&P 500 VIX Short-Term Futures Index ("Index") for a single day. The Fund's investment objective currently is to seek results (before fees and expenses) that correspond to two times (2x) the performance of the Index for a single day. If the Fund were successful in meeting its new objective, on a day the Index rose 1%, the Fund should rise approximately 1.5%, before fees and expenses. Similarly, on a day the Index fell 1%, the Fund should fall approximately 1.5%, before fees and expenses.

ProShares Short VIX Short-Term Futures ETF (NYSE Arca: SVXY) will change its investment objective to seek results (before fees and expenses) that correspond to one-half the inverse (-0.5x) of the Index for a single day. The Fund's investment objective currently is to seek results (before fees and expenses) that correspond to the inverse (-1x) of the Index for a single day. If the Fund were successful in meeting its new objective, on a day the Index fell 1%, the Fund should rise approximately 0.5%, before fees and expenses. Similarly, on a day the Index rose 1%, the Fund should fall approximately 0.5%, before fees and expenses.

Certain regulatory approvals will be required for the Funds to permanently pursue these new investment objectives. In the event that such approvals are not obtained, the Funds will consider other courses of action.

Pair of Volatility Funds to Be Re-Launched

2018-02-26T07:56:00.003-08:00

We received huge news from REX Shares this morning, announcing that they are updating the objective of their VMIN & VMAX volatility pair. This looks like a really interesting, and much more sensible, play on volatility.

They are moving away from high-beta volatility ETFs (which are a high risk for termination when volatility spikes too much) to a product that trades on a daily basis somewhere between XIV and ZIV. The result should be a new VMIN fund that is less "boring" in movement as ZIV but also carry a fraction of the risk of a fund blow up and large drawdowns that were seen with XIV.

Announcement below, with emphasis added.

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The REX VolMAXX Long VIX Weekly Futures Strategy ETF (VMAX) and the REX VolMAXX Short VIX Weekly Futures Strategy ETF (VMIN) have filed supplemental registration statements that revise their stated Principal Investment Strategies. The Funds expect to invest primarily in VIX Futures Contracts with two to six months to expiration, rather than VIX Futures Contracts with less than one month to expiration as was previously the case. Beginning on March 7, 2018, the Funds anticipate that they may begin investing in VIX Futures Contracts with greater than one month to expiration, and the Funds may therefore have exposure to VIX Futures Contracts with a weighted average time that is greater than, and which could be substantially greater than, one month. Additionally, effective on or about April 25, 2018, the name of VMAX will change to “REX VolMAXX^TM Long VIX Futures Strategy ETF”, and the name of VMIN will change to “REX VolMAXX^TM Short VIX Futures Strategy ETF.”

Historically, the amount by which movements in the VIX Index¹ have impacted the price of a VIX futures contract, also referred to as “beta,” has increased as a contract is closer to maturity.² By increasing the weighted average of time to expiry of the VIX Futures Contracts held by the Funds, it is possible, and indeed likely, that the Funds’ “beta” to the VIX Index will decrease. Additionally, because the margin requirements for longer-dated VIX Futures Contracts tend to be lower than the margin requirements for shorter-dated VIX Futures Contracts,³ REX anticipates that this revision to the Principal Investment Strategy will allow the Funds to reduce their exposure to Underlying Funds and ETNs.⁴

The supplemental registration statements, information about the Funds’ holdings and additional information about the Funds can be found at https://www.volmaxx.com/

XIV Is No More

2018-02-09T09:20:00.000-08:00

Market action on Monday this week resulted in the all-time record for a 1-day spike in VIX at 115.6%. This also caused our beloved XIV to implode and alas, it no longer exists.

SVXY, a nearly identical product managed by ProShares, managed to survive the carnage although it lost most of its value. Other inverse volatility products including ZIV, VMIN, and XIVH are still around as well. We plan to move to SVXY and continue business as usual.

Speaking of business as usual, below is our performance of our indicators through Feb 8, 2018, as auto-traded on Collective2:

Our 2017 Indicator Performance: +126%

2018-02-08T22:23:00.000-08:00

We had a great 2016 with our primary indicator turning in a +96% gain, but 2017 was even better with a +126% gain. It was a bit of a wild journey, however, with a political headlines and threats of nuclear war popping up to cause some pretty strong drawdowns mid-year. Our equity curve for 2017 using hypothetical portfolios is as follows:

Below is how our indicators performed when we sent our trade orders through Collective2's auto-trading platform (performance values and graphs here date back to launch in February 2016), echoing the above equity curves.1

Both our VXX Bias and VRP+VXX Bias strategies were bested by a buy-and-hold approach with XIV in 2017 as it set a new record for best annual return. However, knowing that it is not a good idea to buy and hold XIV, I believe the VRP+VXX Bias performance was still rather good and it helped us to sell when it detected trouble coming our way.

Updated statistics:

Values for monthly returns have been tracked along the way and are updated on our Strategy page as well as below.

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Hypothetical and Simulated Performance Disclaimer
The results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Hypothetical and backtest results do not account for any costs associated with trade commissions or subscription costs. Additional performance differences in backtests arise from the methodology of using the 4:00pm ET closing values for XIV, VXX, and ZIV as approximated trade prices for indicators that require VIX and VIX futures to settle at 4:15pm ET.

Holiday Subscription Price Discount

2017-12-17T13:04:00.000-08:00

We are celebrating the holiday season and an awesome trading year with major discounts to our Trading Volatility+ service!

Trading Volatility+ (billed monthly): ~~$200/mo~~ $110/mo
Trading Volatility+ (billed quarterly): ~~$180/mo~~ $90/mo

The Trading Volatility+ service provides access to our proprietary indicators for monitoring volatility ETPs, with performance in 2017 that has reached triple-digit returns, as shown by third-party auto-trading tracking. And that's on the heels of a 75% gain in 2016.

Our automated signals to buy and sell XIV and VXX grew a $100,000 reference portfolio into $353,000 since launching on the Collective2 platform in Feb 2016 (actual trade data for this system, including trade date & time stamps, share quantity and trade price is tracked by, and made available, on Collective2).

Better yet, this performance was achieved with only 26 trades, meaning you don't have to spend much of your time executing trades or excessively focusing on the market.

Our automated signals are sent to subscribers via email or text, with final alerts arriving at 4:32pm ET and preliminary alerts sent at 3:46pm ET. Subscribers also have access to our Intraday Indicators on our website which display updated indicator values throughout the trading day.

For those of you waiting for a final push to subscribe to our service, this is it. Feel more comfortable trading XIV, SVXY, VXX, and UVXY in 2018 by using proven indicators.

If you'd like to learn more about our strategies, please visit our Strategy Page or contact us via email.

Thank you and have a great Holiday Season!

YTD Performance of Our Volatility Indicator: +72.7%

2017-10-13T11:01:00.000-07:00

While most people have been surprised to see volatility trend towards record lows in 2017, at Trading Volatility we have capitalized significantly on it.

The performance of our auto-traded "Trading Volatility 1" algorithm, which is executed and tracked by Collective2, is now at +72% year-to-date, nearly surpassing 2016's recorded return of (+75%).

Cumulatively, that's a 202% gain since we started tracking performance of our algorithm by a third party in February 2016.

The "Trading Volatility 1" system is the auto-traded version of our VRP+VXX Bias indicator which we have published daily to Trading Volatility+ subscribers for nearly five years now.

Trading Volatility+ subscribers have access to our VRP and VXX Bias indicators, our intraday indicator data, receive emails with preliminary and final change alerts for each of the indicators as well as our daily summaries, and interact with our private community of volatility traders in the forum. If interested, you can learn more about our services on our Subscribe page.

As always, each day's indicator values, buy/sell triggers, trade performance summary, and equity curves are tracked in the spreadsheets linked at the bottom of our Subscribe page. Additional information on our trading strategy and indicators can be found on our Strategy page.

Hypothetical and Simulated Performance Disclaimer
The results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Hypothetical backtest results do not account for any costs associated with trade commissions or subscription costs. Additional performance differences in backtests arise from the methodology of using the 4:00pm ET closing values for XIV, VXX, and ZIV as approximated trade prices for indicators that require VIX and VIX futures to settle at 4:15pm ET

Crushing it in 2017: +70% YTD Through April

2017-05-17T12:49:00.000-07:00

Trading has been rather boring for the first four months of 2017, with a giant trade that was opened in XIV in early Nov 2016 carrying all the way into mid-March.

Daily equity curve for our indicators versus XIV:

Notice the lock-step of our indicators with XIV through mid-March while we enjoyed the continuation of conditions to hold XIV, including an amazing +30% return in January. Our VRP+VXX Bias kicked into cash for most of April as the market showed signs of increasing uncertainty and then moved back into a short volatility position for the end of April.

Through April, 2017 performance is as follows:
- VRP+VXX Bias: +70%
- VXX Bias: +77%
- VRP: +61%

XIV (buy-and-hold) remained in-line with VRP at +61% YTD through April.

Updated indicator statistics:

While we no longer offer auto-trading for VRP+VXX Bias, we continue to track our results via Collective2 here.

Trading Volatility+ subscribers have access to our VRP and VXX Bias indicators, our intraday indicator data, receive emails with preliminary and final change alerts for each of the indicators as well as our daily summaries, and interact with our private community of volatility traders in the forum. If interested, you can learn more about our services on our Subscribe page.

As always, each day's indicator values, buy/sell triggers, trade performance summary, and equity curves are tracked in the spreadsheets linked at the bottom of our Subscribe page. Additional information on our trading strategy and indicators can be found on our Strategy page.

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Hypothetical and Simulated Performance Disclaimer
The results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Hypothetical and backtest results do not account for any costs associated with trade commissions or subscription costs. Additional performance differences in backtests arise from the methodology of using the 4:00pm ET closing values for XIV, VXX, and ZIV as approximated trade prices for indicators that require VIX and VIX futures to settle at 4:15pm ET.