Question: How about using technicals to squeeze more out of ZIV

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Question: How about using technicals to squeeze more out of ZIV 2017-03-03T15:27:20+00:00
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  • Frank Grossmann
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    Post count: 151

    All these technical approaches have the advantage that they give you a very clear exit and entry signals, however for most of the years you would have the better performance if you just stay invested and never exit. The problem is, that one of 20 of such VIX spikes are so big, that you would lose most of your investment. This is why it is better to have a slightly lower performance, but no risk of a total loss.
    The total loss is also relative. If you wait one or two years ZIV would again recover.

    You can use for example ZIV-SMA (Simple Moving Average) cross for day to day exit and entry signals. Anything from 60 to 200 days will give you quite nice results. Short SMA makes you exit and enter more frequently. You can use this SMA method if you are afraid of these “normal” 10% corrections which ZIV has every few months. The drawback of such technical methods, that every time you exit and enter again you lose some performance.

    For normal investors, I think that the rotation of the MYRS strategy is the best way to switch, because you do not need first to realize a loss to switch and you can earn some money also during longer periods of falling markets. However nearly every technical SMA or Bollinger method will give you also quite nice returns.

    The important is, not to miss the fast recovery of ZIV. If you analyze recent draw-downs, then you see that ZIV recovers much faster than SPY. This is also why I would suggest that after a bigger market correction, it makes normally sense to increase your inverse volatility investment and decrease your normal stock market investment. Once the market has recovered you should however re-balance your portfolio to the normal ratio between stock market and inverse volatility investment.

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