Let us look back at 2013 and see how the system I use to trade VIX cycles did and how I actually did with my trades. Why are the two numbers so different? Well I didn't truly understand the system until late June 2013 (I won't spend my capital until I understand it completely) and I hadn't fully proven to myself that I 100% trusted it until….well just a few weeks ago when running the numbers.
VIX CYCLE RESULTS 2013
226% gain with Zero losses
First date is Buy date and second date is Sell date. 7 VIX cycles completed in 2013. Although I trade (SVXY), the data used is (XIV) because that is how I have been plotting the VIX data in my excel sheet all year, not going to change it now! And yes I do keep track of this data daily along with other data not shown. That is a key to spotting the tops and bottoms, monitoring all the data daily.
DATE | VIX | CONTANGO | XIV | GAIN | TOTAL GAIN | |
2-Jan-13 | 14.68 | 7.65% | 18.6 | |||
24-Jan-13 | 12.69 | 8.24% | 22.57 | 21.3% | $1 | |
$1.21 | ||||||
27-Feb-13 | 14.73 | 4.35% | 20.73 | |||
14-Mar-13 | 11.3 | 16.80% | 23.22 | 12.0% | $1.36 | |
19-Apr-13 | 14.97 | 5.66% | 21.27 | |||
10-May-13 | 12.59 | 8.96% | 23.38 | 9.9% | $1.49 | |
26-Jun-13 | 17.21 | 3.98% | 19.11 | |||
7/26/2013 | 12.72 | 9.18% | 26.32 | 37.7% | $2.06 | |
81.0% | 105.8% | |||||
9/4/2013 | 15.88 | 5.03% | 24.4 | |||
9/18/2013 | 13.59 | 8.30% | 28.95 | 18.6% | $2.44 | |
144.1% | ||||||
10/15/2013 | 18.66 | -4.95% | 24.45 | |||
11/12/2013 | 12.82 | 10.64% | 30.82 | 26.1% | $3.08 | |
207.7% | ||||||
12/18/2013 | 13.8 | 7.24% | $33.43 | |||
12/26/2013 | 12.33 | 8.21% | $35.38 | 5.8% | $3.26 | |
226% | ||||||
How I Actually Did 2013
Trade Account - 46% Gain
401k - 25% Gain
SVXY trading
June 26th 75.05
July 26th 84.05 12% Potential Gain (only risked 50%) so 6% Profit
Oct 16th 95.67
Nov 15th 114.06 19.2% Potential Gain (I sold some early) so 13% Profit
Nov 21st 127.81
Nov 22nd 131.35 2.8% Actual Gain
Dec 18th 126.90 (avg buy….work got in the way and cost me lots of money!!)
Dec 20th 130.45 2.8% Actual gain (my own nervousness got in the way and cost me money! Sold to early)
UPRO
I traded a lot, too many to list. I did very well with UPRO all year increasing my total return by just over 15%.
THE BAD
UVXY
Sept 13th 34.50
Sept 16th 32 -6.2% potential loss (only 50% in) so lost 3.1%
I will always hate Larry Summers for this one. He dropped out of the running for Fed Chair and the market took off and killed my trade. No more UVXY for me.
UPRO - New Years Trade
Dec 31st
Jan 6th 2014 - -3.5% loss
So my final score from June 26th 2013 to Jan 6th 2014 was 35.5% trade account total return. My 2013 trade account gain for the entire year was 46%.
My 2013 401k gain was 25% - almost exactly the S&P 500 gain. Not bad considering I only had an 8% gain by mid June - market was up 15% by that point. After that the market went up 11% and I gained 17% using the VIX cycles to trade my account. A nice outperform once I figured out the formula.
I don't feel upset at all when I see the potential 200% gain from last year. Instead I am very happy to know that the VIX Cycle System can give me outsized gains from now on as long as I trust my calculations. Not once was my buy signal wrong in 2013, I just didn't trust it completely. And not once did my sell signal come after a start to a significant drawdown in SVXY. I did not nail the bottoms exactly and I missed out on some of the rise as well. But that's ok because I missed all 5 of the 20% drawdowns in SVXY. Always leave some money on the table so you can lock in your profits before they vanish.
I don't want anyone to expect this kind of gain this year or going forward. The take away is this system will significantly outperform the market and outperform any of the other leveraged market ETFs like (UPRO), (TQQQ), etc. If the market only goes up 10% this year with no major pullbacks then we are not going to see a chance to gain 200% but even at that level we can expect a greater than 50% return trading VIX cycles. So there is no reason to chase gains or rush in to trades because the train will show up again if we are patient enough to wait for it. During QE periods it is possible to very accurately time entry and exits spotting tops and bottoms using the VIX cycles.
One Final Caveat.
This system only works spot on when the bias is to contango on the VIX term structure. I do not have as precise a system for backwardation VIX term structure bias like what happened in most of 2006 and all of 2007. That is still a work in progress. Heck, it might not even be possible to time that one accurately but I will try. But it is possible to make outsized gains on VIX trading on any term structure dating back to 2004 (that's as far back as the data I have goes). Even in 2007 there were huge gains to be made using a modified version of the system I use.
I will let everyone know when I get my next SVXY buy signal and will post all my cycle buy and sell signals when I see them in 2014. As of 1/18/14 it is a sell.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: VIX Call Spread $13 and $15 February 18th expiration ~ 4% of trade account