- Simple buy-and-hold hedge strategies (with rebalancing) are discussed that employ a short position of TMV.
- The four strategies consist of a short position in TMV combined with 1) a long SPY, 2) a short SH, 3) a short SDS, and 4) a short SPXS.
- The strategies are backtested to April, 2009, and show CAGRs of 21.1%, 22.7%, 39.7%, and 54.5% respectively.
- Maximum drawdowns are 9.0%, 8.7%, 14.4%, and 20.1% respectively.
- Arguments are presented that show that large drawdowns seen in the bear markets of 2002-03 and 2008 can be avoided with these hedge strategies.