Actively harvests the risk premium observed in VIX futures using transparent Exchange Traded Products (ETPs).
Deep out of the money VXX call options are used to help define maximum loss.
Holds treasury and gold ETFs to reduce daily portfolio fluctations.
Data as of 6/30/20
*Trailing 1 Year
The Invest In Vol Smart Volatility Strategy (Smart Vol) is a multi-factor algorithmic trading strategy developed in 2015 and updated semi-annually that applies a combination of more than ten weakly correlated indicators that individually demonstrate a profitable short volatility signal.
The indicators include the relationship between the VIX Index and the front two VIX futures, the relationship between the expected next-day VIX Index price and front two VIX futures, the relationship between modeled VIX futures prices and actual prices, as well as the rate at which these relationships change. Smart Vol also includes a series of proprietary and less common indicators that has helped it outperform many competing strategies.
In addition to these proprietary indicators, Smart Vol applies a weighted average of all its indicators to establish its volatility allocation. During periods of higher market volatility, trades may be made several times a day, while, during calmer periods, trades may be less frequent. While each indicator has proven robust in its own right, their combination has resulted in a more profitable strategy.
Smart Vol gains its volatility exposure through a fractional long or short position in VXX. To help avoid significant drawdowns, Smart Vol buys deep out of the money VXX call options to partially hedge any short VXX positions. Smart Vol also uses smaller positions in Treasury, Gold, and/or Gold Miners ETFs to further manage daily portfolio fluctuations. Smart Vol can be customized for use in IRAs and for clients without options trading capabilities.