TradingVolatility.Info - Daily Signal Alert - Jan 18, 2018
There is no change to the current strategy of staying “short volatility” using the 50-30-20 strategy. Note that when the term “short volatility” is used, it refers to UVXY, TVIX & VXX going down in price on a long-term basis and SVXY & XIV going up in price on a long term basis.
Tip # 1
We had a question two days back. Our reader asked why is that SPX is up 25 points and VIX is down and yet UVXY / TVIX is up?
The answer is simple. The pricing of Volatility based ETFs like UVXY TVIX SVXY XIV and VXX DOES NOT depend on spot VIX (i.e. current VIX) and spot SPX (i.e. current value of SPX). It purely depends on M1 and M2 - the current month’s VIX futures and the next month VIX futures.
While there are 8 rules that I have formulated on pricing of these Volatility based ETFs / ETNs based on M1, M2 (you can refer to Page # 29 of our Trading Volatility book), in a nut shell, what you need to remember is if M1 and/or M2 rise, UVXY price will rise. On that day, while SPX rose and spot VIX fell, M1 and M2 were rising and that’s why UVXY price was up!!
You can download our FREE Trading Volatility ebook from our website http://TradingVolatility.info
Tip # 2 - Investing in Index Futures
If you are keeping tabs on my trades for learning purposes at
you will notice that I am doing a lot of Index Futures trades at tastyworks.com
This gives me some diversification from Volatility trading and I have found profitability to be extremely good!!
You can refer to this blog of mine, where I explain all that you need to know to trade Index Futures:
And to open a tastyworks.com account, you can use the below link:
As you would know from my Index Investing book with Brennan, I am not a big fan of investing in individual stocks. But long term investing on indexes is worth it.
So, what strategy would one use when trading Index Futures?
The consensus is 2018 will close with SPX at 3,000 or 3,100. With that in mind, one can
• Invest in 2 contracts of ES
• One can be held long term till end of 2018. This will give you a 120% plus ROI on your meager $5,000 investment!!
• The other ES contract can be traded. Buy low on dips. Sell High on rips
• Investment is only $5,000 per contract. This would make it $10,000 investment total for the 2 contracts
• There are tax advantages to trading futures as well
• In a confirmed bear market, the strategy can simply be reversed!!
Note: The above is NOT an investment advise. Please do your due dilifence!!
Index Futures Book
Soon, we will publish our “Investing in Bitcoin and other Crypto currencies” book and then embark on writing the “Trading in Index Futures" book. Till that time that book comes out, if you have any questions, feel free to email us.
I think all this information being sent by us can be a bit overwhelming. You can save these emails in a folder, and review them during week ends when you are free.
I am writing these emails on topics that come to my mind randomly at the point of time when I start writing So, pardon me, if some topics are just not of any interest to you.
Also, do email us any query or topic which you want us to cover. If we know about that topic, sure we will make an attempt to present the same in a simple, practical and logical manner.
Thanks and Happy Shorting Volatility
Even if one life is changed by our educational attempts, we would consider our efforts in writing the book a success.
The material in this newsletter, the website http://TradingVolatility.info as well as in the book "Trading Volatility - Using the 50-30-20 Strategy" is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. As an investor, you are fully responsible for any investment decision that you make.