May update

Hello! It’s been a while since I posted anything here.  Between working and planning a wedding, a guy doesn’t get much time for market research.

The markets have been in the toilet of late and some of my systems have seen significant draw-down.  Ouch.  The correction, while significant, has been fairly orderly so far.  Realized volatility has been low compared to other corrections.  I have no idea when things will turn around, but hope it will be soon.

The VIX index closed today at 24.49 (the highest close in 2012) and the near term June VIX future settled at 26.20.  The June/July futures are close to backwardation.  That’s not so good for XIV.  The Alpha strategy will eventually move to cash if contango doesn’t strengthen again.

The TSP strategy came within a whisker of an allocation change before the market turned south.  That sucks but is part of the game.

I’ve been playing around quite a bit with the new Charts page and Google spreadsheet.  I thought I had the TSP indicator completely automated using “=googlefinance” formulas in my spreadsheet, but the new values weren’t always updating on the chart.  Overall I’m pleased with the work and the maintenance is fairly low.

Reading

If you haven’t already, check out this article titled “Adaptive Asset Allocation”.  It’s a nice read and the strategy idea seems promising.

Also check out this paper titled “Understanding ETNs of VIX Futures”. Among other things, the authors present and backtest a model for switching between XVZ and XVIX. Nice.

Oh yeah, also check out Market Sci blog for recent posts related to simple volatility strategies as well as another source for free simulated VXX data. He even includes formulas in the excel file!

Cheers,

Mike