EVALS Marks 5th Anniversary with Gains of 334%

A number of readers have wondered about the current status of EVALS, given that I have not provided any updates on this model portfolio for three years.  Rest assured, EVALS is alive and well and has been thriving quietly in the background. 

For those who may be new to the story, EVALS was launched on November 17, 2011 as a proof of concept for a strategy that traded exclusively VIX and volatility-based ETPs on a long-only basis.  The proof of concept was a success and in 2014, I began to incorporate some of the tenets and analytics associated with EVALS into my investment management business, manages three different volatility strategies, one of which is a direct descendant of the original EVALS formulation.

Along the way, I made only one tweak to EVALS, but it was an important one.  After

Every Single VIX ETP (Long and Short) Lost Money in 2015, I sought to eliminate the long-only handicap, with the result that as of January 2016, EVALS has been allowing for up to 50% of the portfolio’s assets to be held in short ETP positions.  As some brokers have limited availability of VIX ETPs to short, to be fair to all subscribers, I mandated that EVALS only consider short positions in VXX, UVXY and SVXY, as these are the only three VIX ETPs with a sufficiently liquid options market to easily allow for synthetic short positions. 

I often receive requests for performance data for EVALS.  Since the intent of EVALS and the Stock of the Week and other popular model portfolios has never been to wow readers with an avalanche of over-the-top performance data, I will update this data only once per year, on the EVALS anniversary date.

For the five-year anniversary, I have elected to include an equity curve, a performance data table and a list of trading and performance statistics below.

The first graphic is an equity curve that is based a hypothetical model portfolio that began with $100,000 in November 2011 and shows EVALS growing by 334% during a five-year period (34.13% annualized) in which the S&P 500 Index (total return) gained 84%.   

[source(s):VIX and More]

The second graphic is a data table that includes monthly return data for each of the past sixty months and captures the maximum drawdown during each year.

[source(s):VIX and More]

The third and final graphic is an aggregation of trading statistics, risk-adjusted performance data and related numbers.  Included in these numbers is a Sharpe ratio of 0.96, a Sortino ratio of 1.67 and a Jensen’s alpha of 5.30.  Of course, these numbers are not meant to be comprehensive, but it should save me a from a few emails.

[source(s):VIX and More]

As a reminder, EVALS is a model portfolio that trades the full universe of VIX and volatility-based ETPs on a long-only basis, except for three products (VXX, UVXY and SVXY) that can be shorted at a maximum of 50% of the value of the portfolio.  The links below discuss the history, objectives and securities traded in the EVALS (virtual) model portfolio, which employs a very aggressive approach to trading volatility.

[Pricing for EVALS is $99 per month or $990 per year.  For those who are interested in subscribing, just click on the Subscribe button on the upper right hand corner of the EVALS blog to subscribe via PayPal or email me at bill.luby[at]gmail.com if you wish to pay for an annual subscription, which will be direct billed via PayPal.  There is no free trial associated with EVALS, though subscribers to the VIX and More newsletter (which does include a 14-day free trial) will certainly get a flavor of how I think about VIX-based ETPs.]

Related posts:

• Every Single VIX ETP (Long and Short) Lost Money in 2015
• EVALS Performance Update (+143% Since November 2011 Inception) and Launch of New Investment Management Business
• EVALS Q4 2012 Update:  Up 61.97% for 2012 and 76.00% Since the November 2011 Inception
• EVALS One-Year Summary and Performance Update (+74.13%)
• EVALS Q3 Update:  Up 70.59% Since November 2011 Inception
• EVALS Q2 2012 Update
• EVALS Q1 2012 Update
• EVALS Relaunches, Now Focusing on VIX Exchange-Traded Products

Disclosure(s):  none

EVALS Performance Update (+143% Since November 2011 Inception) and Launch of New Investment Management Business

The two graphics below summarize the performance of the EVALS model portfolio since its launch on November 17, 2011 through yesterday’s close – a period that includes twenty full months and two partial months. In the 1 ½ months of 2011, EVALS gained 8.66%; for 2012 the return was 61.97%; and the year-to-date performance for 2013 is a gain of 38.18%. The total gains since inception are 143.21%, which is 102.62% better than the +40.58% performance of the benchmark S&P 500 index during the same period.

The equity curve graphic, which is based on a hypothetical model portfolio that began with $100,000 in November 2011 also includes some critical EVALS performance and trading data. These numbers point to a median holding period of 44 days, a win percentage of 63.1%, and an average winning trade that is 4.58 times larger than the average losing trade.

For those who may be interested in risk-performance data, I have also calculated the Sharpe ratio (2.10), Sortino ratio (2.72) and Schwager Gain to Pain ratio (2.33). The maximum drawdown remains the 29.4% peak-to-trough decline during the second quarter of 2012. One surprising number is the continued relatively high correlation between EVALS and the SPX of +0.77. This phenomenon is explained largely by the fact that since November 2011, the market environment for stocks has been considerably more bullish than bearish, so there have been quite a few months in which EVALS and the SPX have both posted gains.

[source(s):VIX and More]

The graphic below summarizes the same data in the form of monthly returns for EVALS in the top table and the performance of EVALS minus the SPX in the bottom table.

[source(s):VIX and More]

As a reminder, EVALS is a model portfolio that trades the full universe of VIX volatility ETPs on a long-only basis. The links below discuss the history, objectives and securities traded in the EVALS (virtual) model portfolio, which employs a very aggressive approach to trading volatility.

Please note that going forward, I will no longer be publicly updating EVALS performance data due to a variety of factors related to the launch of my new investment management business. I will continue to offer the EVALS model portfolio service (details below) and will be pleased to discuss current performance data privately. Also, as soon as the launch of my new investment management business is finalized, I will highlight some of the particulars in this space.

[Pricing for EVALS is $60 per month or $600 per year. For those who are interested in subscribing, just click on the Subscribe button on the upper right hand corner of the EVALS blog to subscribe via PayPal or email me at bill.luby[at]gmail.com if you wish to pay for an annual subscription with a personal check. There is no free trial associated with EVALS, though subscribers to the VIX and More newsletter (which does include a 14-day free trial) will certainly get a flavor of how I think about VIX-based ETPs.]

Related posts:

• EVALS Q4 2012 Update: Up 61.97% for 2012 and 76.00% Since the November 2011 Inception
• EVALS One-Year Summary and Performance Update (+74.13%)
• EVALS Q3 Update: Up 70.59% Since November 2011 Inception
• EVALS Q2 2012 Update
• EVALS Q1 2012 Update
• EVALS Relaunches, Now Focusing on VIX Exchange-Traded Products

Disclosure(s): none

EVALS Q4 2012 Update: Up 61.97% for 2012 and 76.00% Since the November 2011 Inception

While EVALS finished up 2012 on a slightly disappointing note, the strategy’s first full calendar year was a strong success. EVALS was up 61.97% for 2012, topping the benchmark S&P 500 index in eight of those twelve months and bringing the performance since the November 17, 2011 inception to a gain of exactly 76.00%.

As a reminder, EVALS is a model portfolio that trades the full universe of VIX volatility ETPs (there are currently 20 in all) on a long-only basis.

In the fourth quarter of 2012, the volatility space was dominated by concerns over the euro zone financial crisis, the U.S. elections and ultimately, the fiscal cliff negotiations. EVALS performed well in all instances, with the exception of the last week of the year, when the portfolio was aggressively positioned in favor of a resolution of the fiscal cliff stalemate. As the fiscal cliff deal came after the first of the year, it turns out that this positioning did not pay off until January and was a substantial drag on performance during the last week of December.

Rather than discuss a bunch of data in prose, I have elected to superimpose some of the more critical EVALS performance and trading data on the equity curve graphic below. The equity curve shows the performance of a hypothetical model portfolio consisting of $100,000 that was invested in EVALS and the benchmark S&P 500 index on the November 17, 2011 inception date.

While all the numbers are very strong, particularly the risk-adjusted performance data (Sharpe ratio, Sortino ratio and Schwager Gain to Pain ratio,) one slight disappointment has been the correlation between EVALS and the SPX.   Part of the reason this number is higher than some might expect is that EVALS has had a short volatility bias for most of the past 15 months – a trend which is not likely to continue in the future.  Another reason why the correlation is higher than might be expected is that EVALS has only lost money in three months and it turns out that the SPX was down in two of those three months, including one month (May 2012) where both EVALS and the SPX were down sharply.

The table below summarizes the monthly returns for EVALS, for the SPX, and for EVALS minus the SPX.

The links below discuss the history, objectives and securities traded in the EVALS (virtual) model portfolio, which employs a very aggressive approach to trading volatility, utilizing primarily VIX ETPs for both long volatility and short volatility positions, as market conditions warrant. EVALS also seeks to benefit from opportunities presented by movements in the VIX futures term structure.

[Pricing for EVALS is $60 per month or $600 per year. For those who are interested in subscribing, just click on the Subscribe button on the upper right hand corner of the EVALS blog to subscribe via PayPal or email me at bill.luby[at]gmail.com if you wish to pay for an annual subscription with a personal check. There is no free trial associated with EVALS, though subscribers to the VIX and More newsletter (which does include a 14-day free trial) will certainly get a flavor of how I think about VIX-based ETPs.]

Related posts:

• EVALS One-Year Summary and Performance Update (+74.13%)
• EVALS Q3 Update: Up 70.59% Since November 2011 Inception
• EVALS Q2 2012 Update
• EVALS Q1 2012 Update
• EVALS Relaunches, Now Focusing on VIX Exchange-Traded Products

Disclosure(s): none

EVALS One-Year Summary and Performance Update (+74.13%)

When I launched EVALS (whose formal name is ETP Volatility Analysis Long/Short) in November of 2011, it was an effort to address requests made by many of the VIX and More newsletter subscribers related to how to translate some of the trading ideas presented in the newsletter into a real-time trading system. I waited until November 2011 to launch EVALS, because it was not until that point that the VIX ETP space had liquid products with enough variety that it was possible to construct a meaningful all-VIX ETP portfolio.

With EVALS having turned one year old as of November 17, 2012, I am now comfortable about providing more information about this model portfolio’s performance data in some detail.

First off, EVALS gained 74.13% in the first year following its launch, with the benchmark S&P 500 index gaining 11.82% during the same period, meaning that EVALS beat the SPX by 62.31% over the course of the year (months with asterisks indicate partial-month results.)

In terms of risk-adjusted performance, EVALS performed as follows during the first year:

• Sharpe Ratio: 1.65
• Sortino Ratio: 2.39
• Schwager’s Gain to Pain Ratio: 2.91

For anyone who might be interested, while the Sharpe and Sortino ratios are widely-used measures of risk-adjusted performance that have a relatively long history, I included Jack Schwager’s Gain to Pain Ratio (GPR) because I have a personal affinity for it, even though it is relatively new, having generated been introduced to the broad public following the publication of Schwager’s latest book, the highly recommended Hedge Fund Market Wizards, which dates from May 2012. The GPR is easy to calculate and is essentially the sum of all monthly returns divided by the absolute value of the sum of all monthly losses. Schwager indicates that a GPR of above 1.00 is “very good” while he describes a GPR of over 1.50 as “excellent.”

The following data summarize the trading in EVALS during its first year:

• there were 81 trades during the year, involving 12 different VIX and volatility-based ETPs
• a total of 33 trades were closed out during the first year
• of those 33 closed trades, 21 were winners and 12 were losers, for a 63.6% win rate
• the average winning trade gained $4,087 and the average losing trade lost $757, with the average of all trades netting a gain of $2,325
• the median holding period for all closed trades was 60 days
• the maximum peak to trough drawdown was 29.4%
• the cumulative correlation between EVALS and the S&P 500 index was +0.77 for the year, with a low of +0.15 at the end of the second quarter and a high of +0.83 in the third quarter (using monthly return data)

The following equity curve shows the performance of a hypothetical model portfolio consisting of $100,000 that was invested in EVALS and the S&P 500 index on the November 17, 2011 inception date.

The links below discuss the history, objectives and securities traded in the EVALS model portfolio, which employs a very aggressive approach to trading volatility, utilizing primarily VIX ETPs for both long volatility and short volatility positions, as market conditions warrant. EVALS also seeks to benefit from opportunities presented by movements in the VIX futures term structure.

[Pricing for EVALS is $60 per month or $600 per year. For those who are interested in subscribing, just click on the Subscribe button on the upper right hand corner of this blog to subscribe via PayPal or email me at bill.luby[at]gmail.com if you wish to pay for an annual subscription with a personal check. There is no free trial associated with EVALS, though subscribers to the VIX and More newsletter (which does include a 14-day free trial) will certainly get a flavor of how I think about and trade VIX-based ETPs.]

Related posts:

• EVALS Q3 2012 Update: Up 70.59% Since November 2011 Inception
• EVALS Q2 2012 Update
• EVALS Q1 2012 Update
• EVALS Relaunches, Now Focusing on VIX Exchange-Traded Products

Disclosure(s): none

EVALS Q3 2012 Update: Up 70.59% Since November 2011 Inception

It is my intention to start providing some more extensive commentary and more detailed statistical data for EVALS once EVALS celebrates its one-year anniversary, on November 17, 2012. In the meantime, I will use the close of the third quarter as an opportunity to provide some summary data and answer some of the questions I have received regarding EVALS.

The third quarter was an interesting period for volatility traders. Perhaps what is most notable about the quarter is not what happened, but what didn’t happen: a significant VIX spike. In fact there was only one day during the entire quarter that the VIX closed above 20.00 (July 24^th), a far cry from the second quarter, when the VIX closed above 20.00 on 29 separate occasions.

Regarding the mechanics and performance of EVALS, here are some data that may be of interest:

• in terms of trading frequency, there were 71 trades from the November 2011 inception through the third quarter
• a total of 28 trades have been closed out since inception, as follows:
     Q4 2011 (partial quarter) – 4
     Q1 2012 – 7
     Q2 2012 – 6
     Q3 2012 – 11
• the median holding period for all closed trades from the inception through the third quarter was 61 days
• the maximum peak to trough drawdown from the inception through the third quarter was 29.4% (during April to June)
• the cumulative correlation between EVALS and the S&P 500 index from the inception through the third quarter was +0.82, up from +0.15 at the end of the second quarter (using monthly return data)
• $100,000 invested in EVALS on the November 17, 2011 inception date was worth $170,590 as of September 30, 2012 for a cumulative return of 70.59% (the S&P 500 index was up 15.66% during the same period)

The following equity curve shows the performance of a hypothetical model portfolio consisting of $100,000 that was invested in EVALS and the S&P 500 index on the November 17, 2011 inception date.

Pricing for EVALS is $60 per month or $600 per year. For those who are interested in subscribing, just click on the Subscribe button on the upper right hand corner of the EVALS blog to subscribe via PayPal or email me at bill.luby[at]gmail.com if you wish to pay for an annual subscription with a personal check. There is no free trial associated with EVALS, though subscribers to the VIX and More newsletter (which does include a 14-day free trial) will certainly get a flavor of how I think about VIX-based ETPs.

The links below discuss the history, objectives and securities traded in the EVALS (virtual) model portfolio, which employs a very aggressive approach to trading volatility, utilizing primarily VIX ETPs for both long volatility and short volatility positions, as market conditions warrant. EVALS also seeks to benefit from opportunities presented by movements in the VIX futures term structure.

Related posts:

• EVALS Q2 2012 Update
• EVALS Q1 2012 Update
• EVALS Relaunches, Now Focusing on VIX Exchange-Traded Products

Disclosure(s): none

EVALS Q2 2012 Update

I have received quite a few requests for more information about EVALS lately. While Q2 has been in the books for several months, I thought it might be useful for archival purposes to have a post that provides a summary of the second quarter and of the cumulative activity in EVALS from the November 17, 2011 launch.

First, I encourage those who are interested in learning more about the history, objectives and securities traded in the EVALS (virtual) model portfolio to review EVALS Relaunches, Now Focusing on VIX Exchange-Traded Products. To briefly recap, however, the EVALS model portfolio employs a very aggressive approach to trading volatility, utilizing primarily VIX ETPs for both long volatility and short volatility positions, as market conditions warrant. EVALS also seeks to benefit from opportunities presented by movements in the VIX futures term structure. The result is intended to be a portfolio whose returns have the potential to exceed the returns of the S&P 500 index by a substantial margin, while being largely uncorrelated to the SPX over a long-term time horizon.

Regarding the mechanics and performance of EVALS, here are some data that may be of interest:

• as of June 30, 2012, EVALS had traded nine different VIX and volatility-based ETPs out of a universe of 31 VIX and volatility ETPs, plus two additional ETPs that have an embedded options volatility component: an SPX buy-write ETP, PBP; and a convertible bond ETP, CWB.
• in terms of trading frequency, there were 34 trades from the inception through the second quarter, or 7.6 trades per month
• the average holding period for all closed trades from the inception through the second quarter was 35 days
• the maximum peak to trough drawdown from the inception through the second quarter was 29.4% (this drawdown occurred during the April to June time frame)
• the cumulative correlation between EVALS and the S&P 500 index from the inception through the second quarter was +0.15 (using monthly return data)
• $100,000 invested in EVALS on the November 17, 2011 inception date was worth $145,184 as of June 30, 2012 for a cumulative return of 45.18% (the S&P 500 index was up 12.01% during the same period)

The following equity curve shows the performance of a hypothetical model portfolio consisting of $100,000 that was invested in EVALS and the S&P 500 index on the November 17, 2011 inception date.

Pricing for EVALS is $60 per month or $600 per year. For those who are interested in subscribing, just click on the Subscribe button on the upper right hand corner of the EVALS blog to subscribe via PayPal or email me at bill.luby[at]gmail.com if you wish to pay for an annual subscription with a personal check. There is no free trial associated with EVALS, though subscribers to the VIX and More newsletter (which does include a 14-day free trial) will certainly get a flavor of how I think about VIX-based ETPs.

Related posts:

• EVALS Q1 2012 Update
• EVALS Relaunches, Now Focusing on VIX Exchange-Traded Products

Disclosure(s): long PBP and CWB at time of writing

EVALS Q1 2012 Update

I have received quite a few requests for more information about EVALS and with 4 ½ months since the relaunch of EVALS (or EVALS 2, if you wish) in the books, the end of the first quarter of 2012 seems like a good time to offer up some information about this model portfolio.

First, I encourage those who are interested in learning more about the history, objectives and securities traded in the EVALS (virtual) model portfolio to review EVALS Relaunches, Now Focusing on VIX Exchange-Traded Products. To briefly recap, the EVALS model portfolio employs a very aggressive approach to trading volatility, utilizing primarily VIX ETPs for both long volatility and short volatility positions, as market conditions warrant. EVALS also seeks to benefit from opportunities presented by movements in the VIX futures term structure. The result is intended to be a portfolio whose returns have the potential to exceed the returns of the S&P 500 index by a substantial margin, while being largely uncorrelated to the SPX over a long-term time horizon.

Regarding the mechanics and performance of EVALS, here are some data that may be of interest:

• to date EVALS has traded nine different VIX and volatility-based ETPs out of a universe of 31 VIX and volatility ETPs, plus two additional ETPs that have an embedded options volatility component: an SPX buy-write ETP, PBP; and a convertible bond ETP, CWB.
• in terms of trading frequency, there have been 34 trades so far, or 7.6 per month
• the average holding period for all closed trades has been 35 days
• the maximum peak to trough drawdown so far has been 6.9% (during the second week of February)
• the cumulative correlation between EVALS and the S&P 500 index since the November 2011 launch is +0.15 (using monthly return data)
• monthly performance data are summarized below (November* = partial month performance dating from November 17, 2011)

Finally, the following equity curve shows the performance of a hypothetical model portfolio consisting of $100,000 that was invested in EVALS and the S&P 500 index on the November 17, 2011 inception date.

For the record, pricing for EVALS is $50 per month or $500 per year. For those who are interested in subscribing, just click on the Subscribe button on the upper right hand corner of the EVALS blog to subscribe via PayPal or email me at bill.luby[at]gmail.com if you wish to pay for an annual subscription with a personal check. There is no free trial associated with EVALS, though subscribers to the VIX and More newsletter (which does include a 14-day free trial) will certainly get a flavor of how I think about VIX-based ETPs.

Disclosure(s): long PBP at time of writing