XIV monthly follow-through – Part 4

Back in September of 2012, I ran a series of posts on profiting from XIV monthly follow through.  I showed how such a strategy did very well historically.

Part 1, Part 2, Part 3

Well, it turns out my timing for these posts could not have been worse.  Perhaps they marked the top of such a strategy?

Consider the chart below showing both monthly follow through and monthly mean reversion for XIV using both simulated values from the futures and actual values once brought into existence. (Note: defining monthly follow through as holding XIV through the current month if it rose the prior month and mean reversion as holding XIV through the month if it declined the prior month).  The chart runs from 2004 to September, 2012.  As you can see, the monthly follow through strat dominated.

XIV Monthly FT1

What happened after I published my series of posts? Check out the chart below which shows performance between September, 2012 and the end of 2013.  The tables turned and monthly follow through took a hit while monthly mean reversion prospered nicely.  XIV decided to be less trendy and more choppy.

XIV Monthly FT2

What’s also interesting is that September, 2012 marked the beginning of a period when not only monthly mean reversion did well but daily mean reversion did well, too.  I documented that in this post.

Monthly follow through hasn’t looked bad since last September.  Maybe the relative under-performance was just a phase.

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Posted on January 11, 2014, in Other, XIV. Bookmark the permalink. 2 Comments.

  1. One of the problems I have come across whem programing these things in Ex
    cel is:
    The tendency og being off by on e cell.or day in the calculations.
    Example – buying today rather than the next day when getting a signal. For frequent trading the final results are wildly good compared to realistic results.
    You can do much better with a Stock-Bond swiitch using RSP and TLT price ratios.

  2. If you invest on the first trading day of every month on the top two (using the performance during the prior three months) of XIV, VXX, QLD and TLT, weighing the two on the basis of risk parity for which the daily data of the prior three months is used, you get pretty good returns.

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