nibor100
1,045 posts
msg #142086
- Ignore nibor100 |
2/9/2018 1:49:25 PM
Here are some related tidbits to the ongoing XIV Trading System discussion:
A. Back on 12/13/2017 I posted the following backtest results showing system performance during a period where the XIV tanked considerably and it showed fairly significant drawdowns:
"While there hasn't been a bear market in years, since its inception XIV has had a few tumbles downward, Between Feb 2011 and Feb 2014 XIV had 4 short term bearish drops: a 1 month drop of -30%, followed later by a 2 month drop of -72%, another 1 month drop of -29%, and a 1 month drop of -24%.
I ran a backtest is SS of this system from 2/15/11 to 2/14/14 giving the following results for Portfolio Size of 10 and Fixed Trade Equity:
525 trades, 364 wins, 161 losers for avg annual return of 46.2%
Avg trade gain was 2.64%, 0.26% daily return,
Avg winning trade 7.51%, avg losing trade -8.36%
11 losing months out of 37 months
Max realized drawdown -51.3% Unrealized -65.7%
Net profit $138,830 or 138%
Buy and Hold over same period 110%.
If you are interested in the variable trade equity results, those where one invests all available portfolio cash split 10 ways, so compounding can occur, let me know.
Note: 1 possible issue with this particular backtest is there are only 53 lead-in days of XIV data available."
B. K of G posted some cautionary comments regarding XIV in 2018 when he introduced his new Neural Network system back in Dec 2017
THE RISE OF ARTIFICIAL INTELLIGENCE: MY 2018 NEURAL NETWORK TRADING SYSTEMS <<
"So as 2017 comes to a close I once again begin to think about how I traded over the course of the year (mostly good, a few really bad trades), what my main investment vehicles have been (XIV mostly) and what my trading approaches have been (mean reversion, gap fades, Stratasearch multisystems, etc.). Overall I had one of my best years ever, but I probably could have done better if I had
1. Been more committed to following system signals rather than trying to "out-think" my own trading systems.
2. Spent more time developing systems across a broader range of investments, rather than mostly shorting volatility, and
3. Traded less often, rather than more often.
While the first issue is purely psychological, and last two can be addressed by taking time to look at other investment options, other trading strategies, and thinking more deeply about managing risk
- I cannot think that 2018 will look anything like 2017 did, where it was hard NOT to make money.
I had occasionally placed nearly all of my trading capital into a single asset (XIV) which worked out okay in the end but was not actually a good risk management approach.
While the current low volatility environment may continue for some time, it would be wise to look at other non-correlated assets that could provide good returns while spreading some risk across my portfolio. "
C. My researching XIV history on SF Forum appears to show that the first mention of going long on XIV was by Craken in Aug 2011 in the topic 'How To Design A System Not Just a Filter'.
The earliest XIV systems discussed on SF appear to be in topics 'How to Reduce Drawdowns' 6/23/12 and 'Help Filter-97% Success' 7/15/12.
D When K of G first came out with this SS filter based system I did a bit of research on VIX and XIV and the following article seemed to be a summary of XIV potential and history.
'Beware The Sweet Siren Song Of XIV'
Apr.16.2013 by Mark Whitmore
https://seekingalpha.com/article/1343511-beware-the-sweet-siren-song-of-xiv
One line from the article is kind of apropos:
"...Yet maintaining XIV as a short- to medium- term hold strikes me as a classic "picking up nickels in front of a steam roller" maneuver by investors....
Ed S.
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