35 lines
1.3 KiB
Markdown
35 lines
1.3 KiB
Markdown
# Vol Panics
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This strategy was taken from chapter 5 of [*Buy the Fear, Sell the Greed*](https://moshferatu.dev/moshferatu/buy-the-fear-sell-the-greed) (2018) by Larry Connors.
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## Rules
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1. When VXX is trading above its 5-period moving average and its 4-period RSI is > 70, enter a short trade.
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2. (Optional Aggressive Entry) If VXX closes higher than the initial entry price at any point during the trade, enter a second short trade.
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3. Exit the trade if VXX closes under its 5-period moving average.
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## Parameters
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**Moving Average Period**: The period used in the simple moving average calculation. (Default: 5)
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**RSI Period**: The period used in the RSI calculation. (Default: 4)
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**RSI Smoothing**: The smoothing used in the RSI calculation. (Default: 1)
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**Entry Threshold**: The RSI value above which to enter the short trade. (Default: 70)
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## Backtest Results
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### /VX
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Note that these backtests were performed on /VX (VIX futures) rather than on the VXX etf.
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This is because the data feed I am using had very limited data available for VXX.
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Hopefully these results demonstrate why you must be extremely careful when shorting volatility.
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