You might want to check out the idea of using a 200-day Aroon Up on the VIX as an entry to UVXY and tranche that into two or three short-term Aroon Downs (1, 2, 3 days) as exits. This may be a decent tail risk overlay for the big crashes where the insurance payment isn't overwhelming. It only rarely triggers and gets out quickly as the spike is dying. It wasn't until reading some of your things that I realized the algorithm I got the idea from was based on the Aroon indicators. I have a plot at the end of my bogleheads thread.
Note that I also did a GBTC version of this, it seemed to work pretty well tranching entries with 3 to 7 days Aroon Up (IIRC) for most of the duration but the dynamics seem to have slowed down in the last couple of years.
My working theory is that the Aroon stuff works better for emotion-driven sharp moves and maybe less so when there are some underlying fundamentals constraining price movement. So volatility, crypto, maybe commodities.
You might want to check out some of the strategies at simplevix.com for some ideas. There is one that uses the VIX/VIX3M ratio (https://simplevix.com/vix-vs-vix3m/) to trade long and short volatility rather than for market entry. There are some other interesting strategies too.
I won't precisely use these strategies myself, but they give a good starting point for ideas.
I'm thinking of one that might use SVXY with short-term signals (maybe 70% average investment), UVXY for infrequent events (<2% invested), and SGOV for out of market.
The Aroon-Up approach for both the raw VIX and the VIX/VIX3M ratio is a good, data-driven way to spot when implied volatility is off the rails. Sure, it can beat or at least stabilize buy-and-hold returns, which is compelling for anyone who wants a smoother ride. But it isn’t some magic wand—FRED data’s one-day delay and unexpected regime shifts can trip it up. Still, as part of a broader volatility playbook, I’d definitely give it a nod.
You might want to check out the idea of using a 200-day Aroon Up on the VIX as an entry to UVXY and tranche that into two or three short-term Aroon Downs (1, 2, 3 days) as exits. This may be a decent tail risk overlay for the big crashes where the insurance payment isn't overwhelming. It only rarely triggers and gets out quickly as the spike is dying. It wasn't until reading some of your things that I realized the algorithm I got the idea from was based on the Aroon indicators. I have a plot at the end of my bogleheads thread.
That's an interesting idea. Thanks for sharing, hydromod! Could you point me to the bogleheads thread of yours?
https://www.bogleheads.org/forum/viewtopic.php?p=8229527#p8229527
Note that I also did a GBTC version of this, it seemed to work pretty well tranching entries with 3 to 7 days Aroon Up (IIRC) for most of the duration but the dynamics seem to have slowed down in the last couple of years.
My working theory is that the Aroon stuff works better for emotion-driven sharp moves and maybe less so when there are some underlying fundamentals constraining price movement. So volatility, crypto, maybe commodities.
Cool, thanks for sharing!
You might want to check out some of the strategies at simplevix.com for some ideas. There is one that uses the VIX/VIX3M ratio (https://simplevix.com/vix-vs-vix3m/) to trade long and short volatility rather than for market entry. There are some other interesting strategies too.
I won't precisely use these strategies myself, but they give a good starting point for ideas.
I'm thinking of one that might use SVXY with short-term signals (maybe 70% average investment), UVXY for infrequent events (<2% invested), and SGOV for out of market.
Thanks for sharing! I wasn't aware of the site. I'll dig into it.
The Aroon-Up approach for both the raw VIX and the VIX/VIX3M ratio is a good, data-driven way to spot when implied volatility is off the rails. Sure, it can beat or at least stabilize buy-and-hold returns, which is compelling for anyone who wants a smoother ride. But it isn’t some magic wand—FRED data’s one-day delay and unexpected regime shifts can trip it up. Still, as part of a broader volatility playbook, I’d definitely give it a nod.