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Volatility Premium – Why we invest in ZIV and not in XIV

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Several times I have been asked why we invest in ZIV (inverse mid-term volatility) and not in XIV (inverse front month volatility) in our Maximum Yield Rotation Strategy and in the “Global Market Rotation Enhanced Strategy” to harvest the volatility premium. Harvest Volatility Premium smartly After all, front month VIX Future contango is about 2-3x bigger then medium term contango. At the moment XIV profits from nearly 9% monthly VIX Futures contango. ZIV profits from about 3% … Read more

Risk Management using Timed Hedging – Avoid DrawDowns

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As you perhaps know I have invested all my money in my own strategies, and I and my family (the best wife of all and 4 nice children) are living from the return of these investments. So, I just cannot afford to lose much money in market corrections. Therefore I always try to improve the strategies to lower the risk of major losses through hedging. Timed Hedging The new “Timed hedging” is a major improvement … Read more

What is a hedge and why does it makes sense to do it?

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A hedge is always an investment which is negatively correlated to the main investment. When the main investment goes down, the hedge should go up and if the main investment goes up, then the hedge normally goes down. It is clear, that we like the first, which is to reduce the draw downs with a hedge, but not to reduce the gains. If you have a stock portfolio, then the main hedge possibilities are: A … Read more

Market DrawDown: TMV ETF hedging and timing

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The TMV ETF should stay in place for quite some long time, and it´s a great investment to harvest time decay and avoid drawdown. The big tapering drawdowns of 2013 are past history. You don’t need to look daily at the TMV short hedge. Just keep it. The ETF TMV is a loser and if you stay short it will be a long term winner. It should return about 10-15% per year. How to minimize … Read more

Hedging Portfolio: Comparison of TMV, TMF or EDV

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TMF is by far not so good as TMV short for hedging portfolio. Here is the 12 month comparison. While all treasuries had quite big losses of about -7%, a shortTMV position was flat over the year. I think for IRA accounts the better and saver way of hedging would be a part of the investment in the Bond rotation. This one should make 10-15% per year and is also good for hedging portfolio. Hedging … Read more

Short Volatility: A short analysis of the actual ZIV performance after the July 2014 stock market selloff

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This monthly premium of being short volatility is the only thing which makes the ZIV price go up. Unfortunately there is a second quite strong influence on the ZIV price. This is the market volatility (VIX). In the chart below you see the green VIX chart. Every spike corresponds to a fear spike of the investors. During such spikes we also have smaller market corrections. During these market corrections ZIV is going down, because the … Read more

401k investment: Sleep Well Bond Rotation Strategy – Annual performance of 15%

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You can employ this strategy perfectly in your 401k investment, because it outperforms the stock market by more than double and this with one third of the volatility or risk. This means that since 2008, the return to risk ratio is about six times higher than an investment in the SPY ETF which tracks the S&P 500. Even this year, when many investors are selling bonds due to increasing yields through FED tapering, the bond rotation strategy … Read more

Strategies For Trading Inverse Volatility

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Update: You can see the most recent performance our our inverse volatility strategy here. Consult vixcentral for the daily VIC term curve. In this paper, I present five different strategies you can use to trade inverse volatility. Why trade inverse volatility you ask? Because since 2011, trading inverse volatility was probably the most rewarding investment an investor could make in the markets. Annual returns of between 40% – 100% have been possible which crushes any other … Read more

A new enhanced Global Market Rotation Strategy with adaptive ETF investment allocation

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Update: See the current performance of this ETF investment strategy here. A new enhanced Global Market Rotation Strategy with adaptive ETF investment allocation The GMR strategy performed well during the last 10 years. Especially during years with a strong trend in one of the 5 world markets, this strategy was able to switch early to the best ETF and stay invested until another market ETF took the lead. A known problem for such monthly rotation strategies … Read more

New Maximum Yield Rotation Strategy backtest charts

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Here are two backtests charts of the new MYRS strategy with adaptive allocation, now also suitable for your retirement account. The annual return of the old and the new strategy is more or less the same. During low volatility markets, the return of the new strategy is probably slightly lower, however during difficult volatile years like 2014, the return of the new strategy is significantly higher and the drawdowns and the risk is reduced nearly by a … Read more