Archive | VIX Portfolio Hedging

VIX Portfolio Hedging (VXH) Strategy 2013 Performance Review

Monday, January 6, 2014


In 2013, being maximally long...

VIX Portfolio Hedging (VXH) Strategy 2012 Performance Review

Friday, February 1, 2013


A successful portfolio hedging strategy does two things: it protects against market declines, and it imposes minimal costs in rising markets. In a year like 2012, the ability to minimize hedging costs actually matters more than downside protection, and the VIX Portfolio Hedging (VXH) Strategy bested its benchmarks and peers by being more cost-effective. Let’s start with a look at how the S&P 500 and the iPath VXX ETN fared in 2012. The histograms at fig. 1 show daily…

VIXH: How to Pay Through the Nose for the S&P 500

Wednesday, August 29, 2012


First Trust Portfolios L.P. recently announced the launch of the First Trust CBOE S&P 500 VIX Tail Hedge Fund, a fund designed to replicate the performance of the CBOE VIX Tail Hedge Index. The strategy is very simple. It holds stocks replicating the S&P 500 and, at the monthly VIX expiration, purchases a quantity of front-month VIX calls corresponding to the level of the VIX Index. With VIX<15 or >50, no calls are bought. With VIX>15 and <30, 1% of…

VIX Portfolio Hedging (VXH) Signal Only Modestly Higher

Tuesday, June 5, 2012


There’s an interesting disconnect right now between the qualitative narrative about Greece, the euro, and China, and one quantitative estimate of how aggressively you should be hedged. The narrative is about as gloomy as it gets: everyone is talking about the new German empire (Soros), the “inevitable” Grexit, etc., and mediocre U.S. economic data. But the VXH strategy, while no longer at its lowest setting, is still not signalling the need for large hedges. I developed the VIX Portfolio

The Cost of Hedging Equity Exposure Is Higher Than It Looks

Saturday, March 17, 2012


BofA interest rate strategists Ralph Axel and Ruslan Bikbov suggest that now would be a good time to buy tail risk hedges. (hat tip Joe Weisenthal) 6-month options on 10-year swap futures are as inexpensive now, they claim, as they’ve been in decades, excluding one period in 2006. 6M IV on 10Y Swap Futures, bp. Source: BofA Merrill Lynch Global Research So far, so good. If rates are your key concern, this looks like a decent time to…

15% Discount for the VIX Portfolio Hedging (VXH) Strategy

Wednesday, November 9, 2011


We’ve never offered a discount before on the VIX Portfolio Hedging (VXH) Strategy, and the coupon code at the end of this post is only valid through the end of the week. I don’t know what’s going to happen in the future, but I know that the cost of hedging downside risk is relatively cheap here, and that some investors have taken an “all clear” attitude prematurely. If your portfolio didn’t weather the storms of August and September easily, you…

VIX Portfolio Hedging (VXH) Strategy – Performance and Official Launch

Tuesday, November 16, 2010


The VIX Portfolio Hedging (VXH) Strategy is being offered to the public for the first time, starting today. The strategy is available via professionally managed accounts, or available by subscription here. First-time visitors may want to start with the previous posts on this strategy: Introducing the VIX Portfolio Hedging (VXH) Strategy Why Conventional Hedging Methods Fail VIX Portfolio Hedging in a Crisis-Free World The Discreet Charm of the VXX ETN If your portfolio isn’t already protected against…

The Discreet Charm of the VXX ETN

Thursday, October 28, 2010


This is the fourth post in the series I’m writing to introduce the VIX Portfolio Hedging (VXH) Strategy. To review: the purpose of the VXH Strategy is to provide cost-effective protection against tail risks and market crashes. The strategy takes positions in short-term VIX-based products, and varies its allocation to those positions in response to changes in the market environment. In this post, I discuss the use of the iPath S&P 500 VIX Short-Term Futures ETN

VIX Portfolio Hedging in a Crisis-Free World

Tuesday, October 12, 2010


This is the third post in the series I’m writing to introduce the VIX Portfolio Hedging (VXH) Strategy. The most important feature of the VXH strategy is that it offers protection against severe market declines. Almost equally important, however, is its performance during normal market environments. A hedging strategy that profits during a market crash is no help at all if it imposes heavy costs the rest of the time; this is one of the chief limitations of conventional…

Why Conventional Hedging Methods Fail

Monday, September 27, 2010


This is the second post in the series I’m writing to introduce the VIX Portfolio Hedging (VXH) Strategy. I am discussing the problems with conventional portfolio hedging methods first – before getting into the details of the VXH strategy – because if widely-known conventional methods are suitable, then there’s little reason why anyone should consider a novel method. The two conventional hedging methods I’ll review are diversification (Modern Portfolio Theory), and portfolio insurance using long put options and option…

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More


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