Robert Zingale Profile Picture Individual Investor

Robert Zingale

Internet

  • Education Cornell University
  • Qualifications BA Economics

Volatility Mean Reversion

This model generates returns from the mean reversion and contango inherent in VIX volatility futures. VIX is the ticker symbol for the Chicago Board Options Exhange Volatility Index, which shows the market’s expectation of 30-day volatility. Furthermore, Contango occurs when the futures price is above the expected futures spot price. Consequently, the future’s price will decline to the spot price before the delivery date.

Given the negative yield that contango creates, this strategy is short biased.
My strategy is event driven and based on historical standard deviations from VIX volatility futures' mean reverting level. I determine the portfolio's aggregate dollar-value short exposure based on the current VIX volatility level in relation to its historical mean reverting level. I take larger negative bets as VIX volatility levels rise higher above the mean reverting level, as measured by historical standard deviations.
My data sources include VIX Index levels and VIX Volatility Future prices.
I sell short VXX (iPath S&P 500 VIX Short-Term Futures ETN) and purchase XIV (VelocityShares Daily Inverse VIX Short Term ETN). I determine the amounts by current VIX levels and rebalance after the VIX reaches key levels that trigger cover and short actions. I allocate most of the portfolio to cash and/or Treasuries until volatility rises to levels warranting larger short positions.  The Model may invest in ETNs, unsecured debt obligations whose value is based on the creditworthiness of the company. 

From 2009-2011, there were approximately 25 trading opportunities.
I cover short positions when VIX Index levels reach levels significantly below its historical mean reverting level. The mean reverting level is based on investor risk tolerances over the past year as well as historical considerations. While I'll have some short exposure during low volatility periods (generating returns from contango), this will be much smaller than when the VIX is higher above its mean reverting level.
I may be long XXV during very low volatility periods to make a spread between the larger contango of the short-term VIX futures (VXX) than the mid-term VIX futures' contango (XXV). By being long XXV while short VXX during low volatility periods, I will have a cross-hedge that should mitigate losses in VXX as VIX levels rise.

Risk score

5
24.3%

Best 30 days

-30.9%

Worst 30 days

Performance

  • 1.9%
    30 day
  • 0.4%
    90 day
  • 26.2%
    365 day
Monthly vs S&P500
robert zingale - volatility mean reversion
-5.6% 12 months
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  • $5,000 subscription min
  • Margin account required
  • 1% fee

Replicability

100.0%
  • Replicable

Top 5 Holdings View all

108.5%
19.8%
-28.3%

Model commentary

  1. Short opportunities abound in VIX futures market

    5 April 2013

    There are short possibilities with short and medium-term VIX futures.

  2. Market headwinds ahead. Here's my VIX futures trading strategy 13 March 2013
  3. VIX futures: attractive shorting opportunities are emerging 14 February 2013
  4. My VIX futures game plan for early 2013 4 February 2013
  5. Positioning for greater volatility in 2013 9 December 2012

show more


Performance detail

  • Manager
  • S&P 500
30D 90D 365D SI

Performance

Inception March 29, 2011
as of May 20, 2013 Manager S&P 500 Average Subscriber
Past 30 days 1.9% 7.1% 1.9%
Past 90 days 0.4% 8.8% 0.4%
Past 365 days 26.2% 28.6% 25.2%
Since Inception (Annualized) 1.6% 11.5% -
2013 (YTD) 9.0% 16.8% 8.8%
2012 38.6% 13.4% 37.1%

Risk Metrics

Last 365 days
as of May 20, 2013 Manager S&P 500
Best 30 days 13.8% 8.2%
Worst 30 days -3.8% -7.0%
Volatility 14.7% 12.7%
Sharpe Ratio 1.78 2.24
Sortino Ratio 2.17 3.23
Maximum Drawdown -5.6% -7.7%
Value-at-risk (95%, 1 week) -3.4% -3.0%
vs. S&P 500
Information Ratio -0.19
Alpha 7.6%
Beta 0.65
R-Squared 0.32
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  • $5,000 subscription min
  • Margin account required
  • 1% fee

Latest transactions view all

Average trades per month 4.7
Executed Symbol Security Replicable Type Price
05/17/13 VXX iPATH S&P 500 VIX Short-Term Futures ETN Yes Sell short $18.35
05/09/13 VXX iPATH S&P 500 VIX Short-Term Futures ETN Yes Sell short $18.74
05/07/13 VXZ IPATH S&P 500 VIX M/T FU ETN Yes Buy $19.70
05/07/13 VXX iPATH S&P 500 VIX Short-Term Futures ETN Yes Sell short $18.23
05/07/13 VXZ IPATH S&P 500 VIX M/T FU ETN Yes Buy to cover $19.63
05/01/13 VXZ IPATH S&P 500 VIX M/T FU ETN Yes Sell short $20.47
04/23/13 VXZ IPATH S&P 500 VIX M/T FU ETN Yes Buy to cover $20.45
04/19/13 VXZ IPATH S&P 500 VIX M/T FU ETN Yes Sell short $21.22


Important Information

1. Past performance is no guarantee of future results.

2. Performance of the model manager's account is calculated by Covestor on a daily time-weighted basis, including cash, dividends and earnings distributions, and broker commissions. Manager returns include trades that fail Covestor's trading rules, do not reflect any Covestor suitability or risk score restrictions and are exclusive of Covestor fees. More

3. Average subscription returns ("Avg Sub" or "Avg Client") are calculated by Covestor and are composed of the average, daily, time weighted returns of all active subscriptions to the underlying model. These daily average returns are then linked together for the timeframe requested. In addition, these returns include cash, dividends and earnings distributions, brokerage commissions, Covestor advisory fees, and reflect individual client suitability and risk score restrictions. More

4. All graph data is as of the end of day for the referenced period, unless otherwise specified. The subscription minimum is the minimum subscription required to follow a particular model. The minimum amount is determined by Covestor, based on the characteristics of the underlying model. It should not be considered as specific investment advice for your investment situation.

5. The performance charts are provided for informational purposes only, and should not be used as the basis for making an investment decision. Variables such as corporate actions or foreign exchange may affect daily performance displays. We rely on mathematical formulas, computer programs, and pricing information from third-party vendors to provide these returns. Neither Covestor nor any of its data or content providers shall be liable for any errors in this information or any actions taken by you in reliance upon this information.

6. Benchmark returns have been calculated by Covestor using a time-weighted calculation of daily index valuations and do not include cash, dividends and earnings distributions, or transaction costs. More

7. Leverage indicates the level of margin utilized and is calculated by dividing gross exposure by portfolio net liquidation value.

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9. Top Replicable Holdings: These securities are currently held in the model manager's brokerage account. Those marked as "Replicable Holdings" currently pass Covestor's trading rules, subject to individual client constraints. Eligibility for replication may change over time. Actual client subscription holdings may vary.

10. Latest Transactions: These transactions were executed in the model manager's brokerage account. Those marked as "Replicable" () passed Covestor's trading rules and were eligible for replication at the time of execution, subject to individual client constraints. Eligibility for replication may change over time. Actual client subscription trade activity may vary.

11. S&P 500 Index is an unmanaged index compiled by Standard & Poor´s Corp. Index returns do not reflect any management fees, transaction costs or expenses. Individuals cannot invest directly in an Index. S&P 500 index data: S&P/Dow Jones Indices LLC, a subsidiary of The McGraw-Hill Companies Copyright © 2013.


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