Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Simpler SVXY Strategy

|Includes:ProShares Short VIX Short-Term Futures ETF (SVXY)

I had earlier posted a strategy which combined SVXY puts and calls and a SVXY/UVXY combo strategy. I was asked what the returns would be if the SVXY UVXY combo strategy was replaced with pure SVXY, so that the strategy would be in autopilot with one annual rebalancing each year. This is for someone who doesn't have time to watch the markets (and I completely understand that, as I am drowning in work myself). Here's the updated Strategy:

On each January, buy one year SVXY puts with strike 30% out of money, and one year SVXY calls with strike 40% out of money. Put 12.5% of entire portfolio in puts, 37.5% in calls, and the remaining in SVXY.

Average annual return from Jan 2005 to Jan 2014 is ~125%. Max annual drawdown is -48%. Strategy returns by year

Year Return
2013 84.2%
2012 504.1%
2011 -48.3%
2010 526.7%
2009 501.1%
2008 -3.0%
2007 -17.4%
2006 198.0%
2005 183.0%

So 3 down years and some massive up years.

Disclosure: The author is long SVXY.

Stocks: SVXY