- 01/14/2015 at 7:52 am #15836Frank GrossmannParticipant
You would need to short 300’000$ VIX futures. One future is 1000x the price, so at 19.50 you would need to short about 15 VIX June futures. The UB future is quite expensive. One future is about 172’000$. 70% EDV would be 700’000$ EDV or 1.5x = 1’050’000$ TLT equivalent. This means you need to buy 6 UB futures.
The UB futures need to be rolled every 3 month. You can keep the VIX future also for 2 month. I would close it before it moves down to month 3.01/17/2015 at 8:09 am #15966Michael ParzenParticipant
In the description above it says “Since December 2013 we have added adaptive asset allocation to the strategy. ”
Wasn’t the adaptive allocation adopted in December 2014?01/17/2015 at 10:58 am #15981
In Dec 2013 we introduced an equal volatility mechanism, so when one of the ETF was above a certain volatility threshold its position was scaled down and the strategy partially in cash. This has now evolved into what we consider now a real “adaptive allocation”, where the strategy does not switch “binary” between the ETF, but gradually changes the allocations; so this now incorporates the prior volatility control and also the hedging positions Frank had described in addition the the strategy signals before. Indeed the name “adaptive allocation” was used twice and this might lead to confusion.
See here for a more detailed explanation of how they work.02/13/2015 at 1:00 pm #17208mikernortonParticipant
While looking at historical price volatility of ZIV, I noticed that on December 30, 2014, ZIV declined by roughly 50% then subsequently bounced back 100% the next day (see chart below). I was wondering if you could shed any light on what happened to ZIV during this short time period. Also, wouldn’t this rapid decline and bounce-back significantly distort the modified Share Ratio calculation, since it would be captured in the look-back period?
Mike02/13/2015 at 2:37 pm #17209
Mike, this is a technical glitch in the Yahoo data, not real market data (compare in Bloomberg for example). We have algorithms in place to filter this kind of errors, so they do not hit our strategies. But we obviously cannot correct Yahoo data in the charts we also show here02/14/2015 at 9:54 am #17253STEPHENParticipant
That erroneous spike distorts the chart:04/03/2015 at 10:51 am #19099STEPHENParticipant
The MYRS Sortino = 5.71
That’s considerably better than all of the other L-I strategies. Is it correct?04/03/2015 at 1:30 pm #19100
Stephen, I also noticed the relative difference and went into detail when setting this up. The reason is the following.Definition of Sortino Ratio
As the portfolio builder is based on weekly data, for the downside volatility (StDev) we’re only considering the weeks where the performance was negative (r<0). In the MYRS, indeed only 147 out of 377 weeks under observation had a negative return, and the annualized standard deviation of these returns was (only) 9.62%.
Which means Sortino Ratio = CAGR / (Downside Volatility) = 54.65% / 9.62% = 5.68 (as of week March 30, 2015).
Interesting enough that the absolute value of the Sortino Ratio therefore can change drastically depending on the granularity of the analysis, e.g. monthly, weekly, or daily. This is one of the main reason why the Sortino Ratio should only be used for a relative analysis of assets or portfolios.
I left the calculation sheet for the downside volatility open in this sheet, have a look by yourself.
Happy to discuss in detail07/23/2015 at 3:00 pm #28379SentientParticipant
I remember Frank writing somewhere that during times of low volatility, one might consider reducing allocation in MYRS, whereas after a VIX spike to 22 or more, one might consider moving more funds from defensive strategies into MYRS/ZIV to capture the mean reversion.
My question is this. What should be given more emphasis in such a decision – the VIX term structure and percentage contango, or the actual spot price of the VIX?
For example at this moment the spot VIX is very low at ~12, however the term structure still shows significant contango. How do you recommend to use these observations to judge expected returns in the short term for MYRS/ZIV strategy?08/09/2015 at 10:05 am #28836
Franks’s comment was referring to some additional trading he is doing beside the published MYRS strategy. He indeed is betting that in case of spikes in VIX in generally calm market, the overreactions we’ve seen recently will lead to gains from short term mean reversion. So the “spike” of VIX above the level of 22% – which he determined as his threshold – in a generally calm market (avg 13-16%), in a contango market would be the “specs”.
To be clear, this is not referring to the backtested quantitative MYRS strategy, but rather a discretionary bet – quite succesfull during the last 12m though. So keep in mind this can always backfire if suddenly you end up investing into a major turmoil – do not take this as investment advice.08/13/2015 at 2:04 am #28896SentientParticipant
Thanks for the informative reply Alex.08/18/2015 at 8:33 am #29030MkimpeParticipant
Thanks for being so transparent about the performance results of the various strategies. Regarding MYRS, do you have data into the expected performance and drawdown of this strategy during a period similar to 2008/9? If the specific ETFs did not exist, is there a way to extrapolate performance and drawdown using other info?
Marc08/24/2015 at 3:47 pm #29150RBParticipant
I’m starting to lose faith in the strategies. At least ever since I started investing back in February 2015, the performance has been pretty bad with the strategies I selected (on top of the monthly $100.00 fee to LI). As an example, telling us to invest in SPXL (for example) just in time to enjoy the largest downturn in the market in 4 years. It looks like overall performance for this year will be at best flat. Of course, this depends on the strategy(ies) one is invested in, but I think we’ve pretty much all shared the recent pain no matter what strategy you’re invested in at the moment. I will stay the course with the investment strategies I started this year, but for now, I honestly regret having embarked on this journey because I think the strategies are unable to cope with the type of environment we’ve experienced during the last year or so.
It’s like I told my last financial adviser: I don’t need any help losing money…I can do that all by myself.
Ron08/25/2015 at 2:51 pm #29179Deshan WoodsParticipant
I feel your pain. I’ve been a member since January, 2014, and have had a wonderful ride so far. I am actually using my gains from the past year or so and pulled back my original capital. I’m strictly riding profit at this point. I switched from the MYRS to the Hell on Fire just a few months ago. I even use TQQQ instead of SPXL, so I’m really aggressive. Don’t get me wrong, I’m taking a pounding right now and I’m just not used to seeing a lot of red in my portfolio. This market is indeed acting strange. Look at TMF falling hard today while VIX is at levels not seen in years while the market appears to be in a rally mode. As Frank said in his market summary at the beginning of August, strange things are rippling through the market and unless he declares and “all cash” movement, I’m along for the ride, although it’s a painful ride at the moment.
I’m confident we will be in the right mix once the market decides what it wants to do. It just needs to start trending in one direction instead of whipsawing back and forth. Can’t wait for September’s Market summary.08/27/2015 at 10:51 am #29207xmonikaParticipant
The maximum drawdown of this strategy from backtest 2011-2015 has been reached this week. There are stocks falling and bonds as well. Are there any recommendations to rotate into cash or it is recommended to wait till end of two week rotational cycle?
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