Off your game?

Read our free Dr K report on how to optimize your mind and body so you can boost your focus when trading the markets.
Your email will always remain private.

VIX Volatility Model - Model switches to SELL on May 11, 2017

Published : May 11 2017 at 9:16 ET

The VIX Volatility Model (VVM) has switched to a SELL at the open. Price of XIV: <opening price>

For SELL signals, buy any of ZIV (less volatile apprx 0.5x), SVXY (1x), XIV (1x). The model thus believes the general markets will move higher thus volatility will decrease.


If the model was on a BUY signal, first sell any BUY signal related ETFs such as VXX or UVXY, then buy ETFs such as XIV, etc (see list above).

For purposes of record keeping, 1x XIV will be used as the benchmark on SELL signals. For those who are more risk averse, buying ZIV (0.5x) is a better choice. Alternatively, one can position a smaller size to reduce risk.

We have stated this elsewhere but it bears repeating. Volatility related ETFs can have wide price swings. You may therefore wish to use your own sell stops though fail-safes are utilized in some cases. Nevertheless, overnight gaps in price cannot guard against this, and volatility ETFs can lose low double digit percentages in rare cases.

IMPORTANT: Keep in mind UVXY is highly volatile so after further thorough testing, a maximum fail-safe of 12% has been set. For XIV used in sell signals, a maximum fail-safe of 6% has been set. Fail-safes may trigger at a smaller loss depending on the situation. Based on backtests and real-time trading, the maximum fail-safes are triggered roughly 11% of the time, thus profits should far outweigh such infrequent events. Such maximum fail-safes can cluster such that the same buy or sell signal may trigger the maximum failsafe more than once.

This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2017 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.