Actively seeks to harvest the risk premium observed in VIX futures using Exchange Traded Funds (ETFs).
Short Holding Period
Strict exit signals trigger quick moves to cash during market uncertainty.
Strategy Developer holds a PhD in Nuclear Physics from MIT and multiple patents in data discovery.
Data as of 3/31/20
*Trailing 1 Year
The Vaucluse Alpha Volatility Strategy seeks to systematically harvest the premium observed in VIX Futures contracts, while opportunistically exploiting their tendency to mean revert. The Strategy uses an algorithmic approach to identify opportunities to establish a short position in a basket of VIX Futures with an average time to expiry of approximately 30 days. The algorithm analyzes the term structure of the VIX® Futures contracts on a daily basis, and triggers a long position in the ProShares Short VIX Short-Term Futures ETF (SVXY) when it signals conditions are favorable. The algorithm analysis is based on the effect of VIX Futures premium on the risk/reward of holding a long position in SVXY in two important ways:
> Quantifying the state of contango - the degree to which medium-term VIX Futures are trading at a premium to short-term VIX Futures and the VIX Index itself, and;
> Assessing the probability of a favorable mean reversion of the VIX® Futures term structure following a period of market instability.
The Strategy manages risk using strict exit signals triggered when market conditions deteriorate, including decreasing levels of contango in the VIX Futures market, and increasing volatility of the VIX Index itself. The Strategy is either 100% invested in SVXY or 100% in cash. Its shortest holding period is one day and its average holding period is approximately ten days.