Apart from anomalies related to futures rolling or risk premium, instruments associated with volatility can also be traded using technical strategies, with the basic ones involving the use of simple moving averages.
Since the decay of the value of instruments is still an issue even for the technical strategies, we only use short positions on VXX-like instruments.
Strategy rules
Short VXX if 10-day simple moving average (SMA) is below 100-day VXX SMA and VXX is below 10-day VXX SMA. No positions otherwise.
Strategy Performance
Test period: 2010 – 15 Dec 2023. Costs (brokerage commissions, slippage and borrow costs) are not included.
| Averaged Strategy | Benchmark: Short VXX | Benchmark: SPY | |
| Full Return | 2 908% | 5 850% | 549% |
| Annualized return | 27% | 34% | 12.95% |
| Max DD | -52% | -92% | -34% |
| Sharpe ratio | 0.61 | 0.42 | 0.70 |
