The market stumble the end of last week dropped the Russell 2000 enough for Frank Roellinger’s Modified Davis Method to signal a 50% sell. That portion of the portfolio gained 17.6% since being opened 30-November-2012. This exit was foreshadowed in the Modified David Method-March 2014 Update. The other half of the portfolio, initiated in July 2009, is still long with a 57% open gain—market breadth has …
Update: On June 18, 2015 the CBOE announced that they would be discontinuing VXST futures and options. These products have not achieved significant volumes so this wasn’t a surprising outcome. As an alternative solution to the desire for options better tracking the VIX the CBOE has added weekly expirations of futures and options to the already hugely popular 30 day VIX futures. This approach has …
It’s been about 7 months since my article on The Modified Davis Method first appeared, so it’s time for an update. Here is the original chart updated through 3/28/14. As before, the top (white) line is the method’s results; the yellow line is the Value Line/Russell 2000 series; the green line is the S&P 500 for reference. The method is still 100% long after the last …
VXX hasn’t hit a new low in 6 weeks, and it’s not because the market is crashing. What has changed is the shape of the VIX futures term structure—the underlying futures that the various volatility Exchange Traded Products (ETP) like VXX, XIV, TVIX, and ZIV are based on (see volatility tickers for the entire list). For most of 2009 through 2012 the monthly roll cost …
We don’t have good metaphors to help us understand the short-selling of equities. It’s easy to understand a straight “long” investment. For example, planting a garden is a reasonable analogy—it involves buying seeds, planting them, and in due time there is a payoff—or not. But in real life people rarely borrow something, immediately sell it, and hope to buy it back at a cheaper price. …
