RE: Would You Like to BEAT EVERY HEDGE FUND MANAGER'S PERFORMANCE? Here is a Method on HOW! The Secret Sauce!!
Nice work as always @haejin. Your time and effort are much appreciated.
I am curious about the inclusion of ZIV, specifically because the VIX is sitting at all time lows and the chances of volatility decreasing more from here seems quite low. On the other hand, a significant market drop could cause volatility to spike considerably which could lead to serious losses in ZIV if it was the current system pick. It therefore seems like:
- Volatility remains low and ZIV is therefore never chosen as the pick.
- Volatility spikes and then begins to drop back towards the current historic lows, leading to ZIV becoming the pick.
In the case of #2, it could be a real problem if that initial volatility spike was just the opening round. If it was to be followed up with increased volatility, it could lead to massive losses.
This fund did not exist back in 2008 when volatility spiked in a huge way. The next closest was in Aug, 2015. In that case, the ZIV performed very similarly to the SPXL and TQQQ. It's likely that the system would have chosen TMF before the drop.
My question is, why include ZIV at all when often it matches the SPXL and TQQQ, but in the case of a market crash, the losses could be massive?
For additional information, I've linked a couple recent articles from Zero Hedge discussing the current state of the VIX. Thanks for your time.
http://www.zerohedge.com/news/2017-11-25/you-are-here-citis-stunning-vix-chart
http://www.zerohedge.com/news/2017-11-25/muir-traders-dont-understand-risks-shorting-vol