SmartSVXY Trading Strategy

Monthly Performance

Benchmark Performance

Performance Note
Performance is as of November 30, 2018

Strategy Type
Algorithmic

Benchmark
SVXY - ProShares Short VIX Short-Term Futures ETF (2018-present)
XIV - Velocity Shares Daily Inverse VIX Short Term ETN (2011-2017)

Holding Period
Medium Term - from 1 day to multiple weeks and months.

Signal Evaluation
Signals are evaluated once per day in the last hour of trading (between 3pm and 4pm). At most one trade per day is executed. Most days there will be no trades.

Active Period
Oct 15th, 2015 - present

Backtest Period
Nov 30th, 2010 - Oct 15th, 2015 (using XIV)

Risk Profile
This is a high-risk short volatility strategy that is best suited for qualified high net-worth investors with high risk tolerance due to the occasional significant volatility of monthly returns and high annual drawdowns. This strategy should have at most 20% allocation of overall liquid investments.

Strategy Description
This is a short volatility strategy. The goal of this strategy is to take advantage SVXY whenever it goes on a multi-week positive run. The strategy tries to prevent the biggest drawdowns in the SVXY which can be quite detrimental to performance. The strategy will always have full exposure to SVXY if it does have exposure at all. It is either 100% invested in SVXY or 100% in cash. The strategy may have long stretches where it is fully in cash if conditions don't favor SVXY. Ultimately for a full year, it is expected the strategy to be always absolutely positive and to outperform SVXY on annual basis. The strategy uses the following Volatility Indicators: VIX Contango Oscillator, Contango, Contango Roll, VIX, VVIX and VATR. The strategy needs two of these indicators to turn green to BUY and only one of them to turn yellow to SELL. This is our most conservative and risk averse strategy and it sacrifices long term return for minimizing drawdowns.

Trading Account Considerations
The strategy targets basic 401(k) trading account without margin. Buys are delayed 3 days after a sell to ensure that the account can perform the buy. We assume 0.1% slippage during the trade execution (price above 0.1% of the close price was used to buy and price below 0.1% of closing was used to sell). A trading fee of $7.50 per transaction is assumed. The initial amount for the strategy is $100,000 and when buying, as close to 100% of the portfolio balance as possible is invested. The cash was assumed to generate 0% return.

Updates
2018-02-16
Due to the termination and delisting of the VelocityShares Daily Inverse VIX ST ETN (XIV) on February 15th, 2018, the strategy will start using the ProShares Short VIX Short-Term Futures ETF (SVXY) which provides an almost identical exposure to the short volatility asset class.

Disclaimer
Prior performance does not guarantee future returns. We were only able to backtest this strategy during the 2010-2015 period as the SVXY did not exist prior to 2010. In addition, the 2010-2015 period features an unprecended intervention in the capital markets by the Federal Reserve and other central banks via Quantative Easing, Zero Interest Rate Policy and other measures. The backtests reflect the market conditions during that period of time which are unprecedented in history. These conditions resulted in an 6.3% average VIX futures contango thus greatly enhancing the performance of short volatility funds like SVXY. Whether these market conditions will persist in the future is unknown and any change in market conditions in the future may affect the performance of the strategy going forward.

Black Peak Ventures does not provide professional financial investment advice specific to your life situation. SmartSVXY is an investment strategy that may not be suitable for your life situation. Black Peak Ventures provides investment analysis of the CBOE VIX futures market and related exchange traded products using algorithmic and discretionary signals derived from proprietary indicators, measurements and analytics.