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Tony Cooper Volatility Strategy #3 - VIX Contango - Tweaked v1.0

by Chaim6, 1991 days ago
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This trading system is based on Tony Cooper's volatility trading strategy #3, which is to simply buy XIV when the VIX futures are in contango and buy VXX when the VIX futures contracts are in backwardation.

It adds to Tony Cooper's startegy by adding a couple of buy and sell rules. These added rules run the risk of being curve fitted and may not work in the future.

VXX has only been around since 2009 and loses money most of the time except for some brief spikes.
XIV has only been around since the end of 2010 and makes money most of the time except for some brief periods. If XIV would have been around on Black Monday in the 1980's when the VIX spiked overnight by more than double then it would have lost 100%.

I backtested this system using synthetic volatility data starting in 2004 and got ~100% AR with ~50% DD, but my synthectic volatility data may not be fully accurate.

These instruments are very risky. You should not trade them unless you understand what makes them tick and only if you limit your investment in them to under 5% or so of your capital.


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Type: Trading System

Object ID: 1477


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Market: Stock Market

Style:
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Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.