Two weeks ago I rolled out a revamped EVALS, giving VIX and More newsletter subscribers first crack at EVALS 2, which is now focusing on VIX-based ETPs. Today I will explain some of my thinking behind this new service offering, discuss some of the details of the new EVALS, and open up EVALS to a broader audience.
Brief History
Ever since the original launch of EVALS, in August 2008, I have received hundreds of requests from newsletter subscribers and other blog readers for a service that would place an emphasis on specific trades involving VIX futures and options. While a good deal of my personal trading involves VIX futures and options, I have been hesitant to launch a service making use of VIX derivatives due to the complexity of some of the futures and options positions, as well as the fact that many potential subscribers are relatively unfamiliar with futures and options and/or do not have the appropriate brokerage accounts. With the proliferation of VIX exchange-traded products and rising interest in these products on the part of retail investors, I have reconsidered my position and have elected to transition EVALS from a service that uses volatility signals to manage a model portfolio consisting of a wide variety of ETPs to one which will focus almost exclusively on VIX ETPs.
Objectives
The main objective of the revamped EVALS model portfolio is to take an aggressive approach to trading volatility, utilizing primarily VIX ETPs for both long volatility and short volatility positions, as market conditions warrant. In a related vein, EVALS will also seek to benefit from opportunities presented by movements in the VIX futures term structure. The result should 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.
Initial Emphasis on 31 VIX ETPs and Two Other ETPs
The universe of ETPs that are part of EVALS includes all 31 VIX-based ETPs (see Slicing and Dicing All 31 Flavors of the VIX ETPs), as well as an SPX buy-write ETP, PBP, and a convertible bond ETP, CWB. A handy link to all 33 of these ETPs can be found here. As of this writing, I am not planning on incorporating low volatility ETPs (e.g., SPLV) or high volatility ETPs (e.g., SPHB) into the universe of ETPs which are candidates for the EVALS model portfolio. Going forward, however, I will ensure that any new VIX-based ETPs are incorporated into EVALS.
Some Details About the Model Portfolio
In terms of format and content, I began the (virtual) model portfolio with $100,000 and have generated new trades after the conclusion of standard NYSE trading hours, with the prices of all opening and closing trades determined by the opening print on the first trading day following the updates. Given the potential for large swings in volatility and the need to be opportunistic with available cash, EVALS will typically maintain a cash position equal to about 10% of the portfolio. There will be times when the portfolio is fully invested and I imagine there will be times where cash may be as much as 30% of the portfolio.
Updates and Reports
In terms of updates, I will provide a brief market commentary as well as a full update on the model portfolio and new transactions on any day in which new transactions are generated. I will also update performance data and provide some commentary at the end of each month and at the end of each VIX options expiration cycle (Dec 20, Jan 17, Feb 14, etc.) Performance data will consist of an update for each holding in the portfolio, as well as absolute monthly performance for the model portfolio and net performance relative to the S&P 500 index benchmark. After the new EVALS has been operating for six months, I will also add an add equity curve, correlation data, trade summary information, etc.
Pricing
As was the case with the original version of EVALS, pricing is $50 per month or $500 per year. In order to subscribe, 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 includes 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
