etfmsolutions: M2 Volatility Trader Debuts....12.04.15

Friday, December 4, 2015

M2 Volatility Trader Debuts....12.04.15

Regular readers know I've explored many ways to trade volatility both in conjunction with and separate from equities since there are frequent periods of divergence in the synchronization of price and volatility. Based on reader feedback I know this is an area of considerable interest.
This new M2 model reflects parallel improvements in the M3 models and has as default inputs XIV and VXX, the VIX index derived ETNs...highly liquid (almost 100 million shares between them today), penny spreads and, in the case of VXX, a rich option chain with narrow spreads and robust open interest. And here's the best part....XIV and VXX trade after hours with good volume.
Below are screen shots of 3 optional settings for M2 > > > > >
First the momentum based top 1 model. MN
Then the mean reversion top 1 model. MR
Then the delta neutral version holding both positions and letting the stops do the work. DN.
Keep in mind that M2 is trading inputs with beta that may approach or exceed a value of 6 so you have to stay focused and keep your wits about you if reversal days kick in.
Other inputs can be substituted for XIV and VXX but the algorithms are tuned for volatility delta..
M2 will be added to the Mosaic software catalog over the weekend.

Mean Reversion below:

Delta Neutral below:

Commentary and Updates

Mosaic Solutions commentary is typically published daily as time permits and market action warrants.
Posts feature Mosaic model updates including delta neutral stops, VIXEN directional trades and PONZO forecasts.

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