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 3/31/20
*Trailing 1 Year
The Invest In Vol Smart Volatility Strategy uses a multi-factor model developed in 2015 and updated semi-annually. The model employs a combination of unique indicators, each significantly outperforming a stand-alone short volatility position. The indicators utilize elements such as 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, and the relationship between modeled VIX futures prices and actual prices. Each indicator has proven robust in its own right, but when used together in this model, have produced more significant signals overall.
A weighted average of all indicators is used to establish the volatility allocation from short VXX to long VXX. During periods of higher market volatility, trades may be made several times a day, while during more calm markets, trades may be far less frequent.
To help avoid sudden and severe market moves triggering significant drawdowns, deep out of the money VXX call options are purchased as a partial hedge to manage potential short-term losses. The Strategy also may use small positions in Treasury, Gold, and/or Gold Miners ETFs to further reduce day to day portfolio fluctuations.