VIX Volatility Model - Model switches to SELL on September 12, 2016

Published : September 12 2016 at 15:52 ET

The VIX Volatility Model (VVM) has switched to a SELL. Buy as close to the closing price as possible. Price of XIV at the time email was sent: <closing price>

This means if the model was on a BUY signal, to sell any SELL signal related ETFs such as VXX, and buy ETFs such as XIV, etc (see list below). 

Note, as discussed in the FAQ's potential weaknesses of the model, after a VIX Spike buy signal is closed out, the original sell signal will be reinstated. The risk is that the original sell signal's fail-safe sell stop may sit far from the current price. Presumably, one would have made a handsome profit in such a situation by closing out their sell signal to buy the VIX Spike buy signal, then buying back the original sell signal. The worst total loss from rebuying the original sell signal after a VXX Spike buy signal was closed out was -23.2%, though profits made had one bought the original sell signal would have more or less neutralized this loss.

The current sell stop on XIV is roughly 17% below where XIV is currently trading. In a worst case scenario, this would more or less neutralize the +17.2% gain achieved on the model's July 15 sell signal.

ETFs: When the model is on a SELL signal, 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.

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