Creating Alpha Strategy
What Is Creating Alpha?
Creating Alpha is a strategy that is trading volatility products like SVXY or VXX. It is designed to take advantage of volatility curve which is in Contango most of the time.
We will also look to go long volatility when the curve is in significant Backwardation. Because the curve is in Contango approximately 80% of the time, we will hold short exposure to volatility the majority of the time.
We will also trade several TLT strategies in the second model portfolio.
Please note that suggested portfolio size for CA alerts is $10,000+
- Volatility strategies and TLT strategies
- Tailored for short to medium time traders
- 2-3 trades per month
- 1-2 open trades at a time
- Targets 3-5% per month
- $10K+ portfolios
- Two separate model portfolios
Creating Alpha produced 2.4% CAGR (compounded annual growth rate) since inception.
The first strategy is PureVolatility through an option only Collar spread, using SVXY or VXX.
The PureVolatility model portfolio will be based on total capital amount of $10,000 with between a 5% and 10% allocation on risk. Those who are trading in a Reg-T account would on average need $10,000 in initial margin to hold the position even though the risk may only be $500.
We will target a risk reward of around 1:1 for a two week holding period. The trade is flexible and allows for adjustments in the event that underlying moves against our position.
The second strategy is TreasuryOptions through various TLT strategies.
This is a very active method of trading TLT using Iron Flies and and debit spreads. This is a full portfolio combination, therefore, it is managed much more conservatively than the standard single TLT Iron Fly.
As such we are targeting lower gains and losses and lower volatility. The objective is to never have the combination trade/portfolio down more than 10% during any trade iteration.
Read full description here.
Why We Are Different?
Our performance is based on real fills. All our trade alerts are based on real trades. We provide a full disclosure on the performance page.
We emphasize options education in a dedicated forum where every trade is discussed before it is placed. Our goal is for our members to understand the rationale behind the trades and not just blindly follow the alerts. We help members to become better traders.
VIX futures complex is an extremely volatile space, therefore we will not always see a smooth drift lower. This is the reason we hedge the trade. Selection of strikes and dates are very important and will change based upon VXX IV and the level of Contango in the futures curve. This is not rules based but rather discretionary.
When shoring volatility, you will win around 80% of the time. The real challenge is not to lose big time during volatility spikes. Our collar strategy seeks risk/rewards of around 1:1. For a strategy that wins 80% of the time, this is an excellent risk/reward.
To see how this played out in real time please review the The Incredible Winning Trade In SVXY article.
We report returns on the whole account (not return on margin).