What Is PureVolatility?
PureVolatility 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 and indicators reveal the trend will continue in the short term. Because the curve is in Contango approximately 80% of the time, we will hold short exposure to volatility the majority of the time.
Please note that suggested portfolio size for PV alerts is $10,000+
- Volatility strategies
- Tailored for short to medium time traders
- 2-3 trades per month
- 1-2 open trades at a time
- Targets 5-7% per month
- ~0.4%/month commissions impact
- $10K+ portfolios
PureVolatility produced 85.4% CAGR (compounded annual growth rate) since inception, including commissions.
The main strategy to gain this exposure will be through an option only Collar spread. We use an inverted Collar on VXX.
The PureVolatility model portfolio will be based on total capital amount of $10,000 with between a 5% and 10% allocation on risk. This is very important as 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. Portfolio Margin accounts would only require the $500 max loss amount. Reg-T is somewhat antiquated when it comes to margin for a Collar spread.
However, this really should not be an issue because if one does not have $10,000 to put aside for this strategy it is probably not appropriate. Furthermore, the increased margin amount will keep members from over allocating to this very aggressive strategy. We will target a risk reward of better than 1:1 for a two week holding period.
The trade is flexible and allows for adjustments in the event that VXX moves against our position.
Read more details here. The strategy is currently included in SteadyOptions service. It is expected to become a separate service on June 1.
Why We Are Different?
Our performance is based on real fills. Unlike many services that base their performance on the "maximum profit potential", which is very misleading, 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.
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).