V1 > Trading Strategy

TRADING APPROACH (SUMMARY)

V1 is basically a directional, volatility trading strategy. It exploits the term structure (contango and backwardation) of the VIX futures premium. The strategy uses time series analysis ("trading by numbers") and does not use classical fundamental or technical analysis.

The strategy can trade either iPath's S&P 500 VIX short term futures ETNs - VXX (the preferred trading instrument) or S&P 500 VIX futures and/or options. V1 adjusts portfolio components on daily basis. The strategy leverage is less than 0.3, i.e. the strategy is underleveraged, in order to prevent disastrous drawdowns from overleveraged trading.

Strategy returns are weakly correlated with S&P 500 index returns. Since the strategy is not correlated to classical S&P 500 swing and trend following strategies, it can be seen as an excellent complement to them.

The recommended minimum account size for the strategy is $2,500,000, if VIX futures are traded. If VXX ETNs are traded, the minimum account size is $100,000.

More performance analytics of the currently traded strategy (ver. 02/2012) can be found on the Back testing page. Beginning from February 2012 (when the system started live trading) we will be tracking the actual trading performance on the Performance page.