Comments on: Under the Hood of VQT—Looking Forward to a Crash

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By: vance3h

vance3h — Mon, 30 Jul 2012 22:52:00 +0000

Hi David, You were right, the closing prices show a 90/10 allocation. I didn’t check the intra-day VXX IV values, that might have been what led me astray…

– Vance

By: David Ware

David Ware — Mon, 30 Jul 2012 17:37:00 +0000

The mix up might be because VQT’s 2% stop hit on last Wednesday’s close so VQT was out on the Thursday close and back in on Friday’s close, missing a big up day in the process.

By: vance3h

vance3h — Mon, 30 Jul 2012 17:00:00 +0000

Hi David, Thanks for the correction on the 20 ma, I have fixed that on my post. Regarding the allocations, I didn’t pull all the data to run the VQT simulation, I just did a empirical match to the moves of VQT’s IV from close last Friday using the percentage moves of SPY and VXX. I’ve done it twice and the 85/15 allocations have matched significantly better than the 90/10 both times. I’ll have to look some more at that.

– Vance

By: David Ware

David Ware — Mon, 30 Jul 2012 16:16:00 +0000

Hi Vance,
In this analysis you state that “The volatility trend metric that VQT uses monitors the 5 and 15 day moving averages for VIX.” I believe its the 20 day ma not the 15.
Also, you tweeted today that VQT was now 85% S&P and 15% VXX, but the 5 & 20 day VIX ma’s have only spent three days in an uptrend and VQT considers that a no trend until it has spent 10 days in that mode. Accordingly I believe they should still be 90% S&P and 10% VXX. Am I missing something? Thanks.

By: vance3h

vance3h — Fri, 13 Jul 2012 22:17:00 +0000

Hi, The stop loss is based on the excess return index — Bloomberg SPVQDER:IND

– Vance

By: E_Redd

E_Redd — Fri, 13 Jul 2012 20:33:00 +0000

Is the stop loss for a raw -2% or -2% excess return?

By: vance3h

vance3h — Thu, 12 Jul 2012 14:41:00 +0000

Hi Nick,
You can see the log scale version here http://sixfigureinvesting.com/wp-content/uploads/2012/07/Log-VQTvsSPX.jpg In addition to the big jump in 2008 there is another in 2011, plus drawdown during 2010 flash crash was quite a bit reduced. Unless there is a another crash VQT won’t be flashy, but shows reduced volatility and long volatility if volatility spikes enough.

– Vance

By: Nick Iversen

Nick Iversen — Wed, 11 Jul 2012 02:54:00 +0000

Can you put the first chart on a log scale please. It’s hard to tell which line is doing better when not on a log scale.

Looks to me as if VQT only ever beat the S&P500 in a brief period.