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Volatility Snap: VIX Based Always In Trading Model (Signal ID – VSnap)

By Lawrence  

Volatility Index (VIX) has been called a market leading indicator by many yet we seldom see any working trading model based on the index available online. This example model shows you what can be done with VIX. It is based on VIX only meaning that it is completely price independent.

Performance

Following is the dollar gain chart on trading a single Emini S&P contract with commission of $2.50 and 1 tick slippage per trade.

image

This model performs very well all these years using its optimized setup from way back in 2002. You can possibly re-optimize it for the current environment but I seriously doubt it will do much better.

Winning rate stands at 64% (long side 69% short side 60%) with average annual return at $10,600. That’s about 210 points a year. Trading frequency is low at about once a week. The maximum drawdown within the life time of the model so far is $18,650 which is greater than the one it optimized with back in 2001 at $13100 but not unexpected because of the peak volatility registered in 2008 to 2009 is 60% more.

There is no mistake here, it performs 10 times better than the end of day model VIX Rotation.


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