In the present day, we’re doing a VTS Evaluation.
Brent Osachoff is an expert golfer turned volatility choices dealer.
He has a subscription-based service at volatilitytradingstrategies.com, which features a free 2-week trial.
It’s this product that we’re reviewing immediately on this article.
His portfolio consists of 5 tactical methods (with a 20% allocation for every technique):
- Defensive Rotation Technique
- Tactical Volatility Technique
- Strategic Tail Threat Technique
- Volatility Development Technique
- Iron Condor Technique
Everyone knows what the fifth technique is.
The opposite 4 methods are the names Brent gave to his varied strategies of buying and selling possibility volatility.
He’ll let you know when he enters and exits any methods in the event you join the service.
He calls it the “VTS commerce sign service” slightly than “commerce alert.”
It’s not such as you get a “ding” in your cellphone, after which you need to rush to your laptop and put within the commerce.
It’s simply an e-mail despatched out earlier than midday Jap time each buying and selling day.
You’ll be able to put within the commerce any time that buying and selling day.
And it ought to solely take you a couple of minutes to take action.
You’ll nonetheless get an e-mail if there isn’t a commerce that day.
It should simply say zero trades immediately.
We’ll hereafter name this the “each day e-mail,” despite the fact that it isn’t “each day” within the sense of each calendar day.
It’s each buying and selling day.
Within the each day e-mail, you will notice a diagram of a color-coded round gauge displaying whether or not we’re in low, mid, or excessive volatility.
That is his personal proprietary “VTS Volatility Barometer,” consisting of a method contemplating over a dozen volatility metrics.
Like a gauge, it goes from 0 to 100% to let you know whether or not the market is in a excessive, mid, or low volatility surroundings.
He says in a public YouTube that the Volatility Barometer:
“Is one of the best measure of market volatility that you’ll find anyplace.”
Volatility merchants will use this Barometer in varied methods to assist them commerce volatility methods.
Even for lengthy equities merchants, he says that exiting lengthy inventory positions when the Barometer goes above 50% will assist you to keep away from large market crashes.
For example of how this Barometer is used, we are going to have a look at the Strategic Tail Threat technique first as a result of this technique makes use of the VTS Volatility Barometer most instantly.
If the Barometer exhibits 0% to 55% volatility, then the Tail Threat technique shall be lengthy shares by holding SSO (the 2-times S&P 500 ETF).
If the Barometer exhibits a 55% to 80% vary, the technique switches to a extra conservative IYR (Actual Property ETF).
If the Barometer exhibits excessive volatility above 80%, the Tail Threat technique goes lengthy by holding VIXM (VIX mid-term futures ETF).
The Defensive Rotation technique doesn’t use the VTS Volatility Barometer instantly.
It makes use of one other set of volatility metrics to supply diversification in several methods.
The technique rotates the holding from VGLT to QLD, XLU, and money because the volatility goes from low to excessive.
VGLT is the Vanguard long-term treasury ETF.
QLD is the two-times Nasdaq ETF.
XLU is the utilities ETF.
In excessive volatility, this technique exits holdings and sits in money.
Now you have got an thought of how the VTS methods work.
They match one of the best asset class for the given volatility regime.
The Tactical Volatility technique isn’t any completely different.
Relying on the metric indicators, it both sits in money, goes lengthy volatility, or goes quick volatility.
This technique shorts volatility, which means that it advantages if volatility drops.
Brent believes that shorting volatility is the proper aspect to be on.
However he usually reminds folks in his YouTube movies that it’s a harmful sport in the event you have no idea what you’re doing.
It’s a good factor that he is aware of what he’s doing, and he has been doing it safely and constantly for a few years.
He makes use of defined-risk constructions (corresponding to directional butterflies on VXX) in order that spikes in volatility don’t change into harmful and the loss is contained.
These constructions are low-cost however can have excessive rewards.
So it’s potential to make much more than the potential loss.
As a part of the each day e-mail, you get his indicators for entry and exit to iron condors.
It helps to know the way he trades iron condors.
In order a value-added bonus to subscribers, they get his iron condor course, which consists of bite-size movies totaling about 4 hours.
He begins every lesson with a fast one-sentence recap of the earlier lesson.
Repetition helps with retention.
The standard of the movies is superb, and I can solely think about the time spent on video enhancing.
The digital camera pictures, graphics, charts, display captures, and animations are of very prime quality.
I don’t know if he had video enhancing assist or whether or not he did them himself.
However he has talked about that he works so much to the purpose of being a workaholic.
So I wouldn’t be stunned if he did them himself.
His iron condor technique is a no-adjustment iron condor positioned with the shorts at 15-delta and expiration two months out.
Take revenue at 50% of the credit score acquired.
Psychological cease loss on the identical greenback worth.
He trades them on extremely liquid ETFs (corresponding to SPY) and can layer as much as three condor trades concurrently for diversification of worth and expiration.
He doesn’t enter trades in robust traits and doesn’t enter trades in low volatility environments.
In intervals of low volatility, he enters a calendar as an alternative and trades it equally to how he trades iron condor.
However the take revenue and cease loss are completely different.
How does one know whether it is in excessive or low volatility?
The VTS Volatility Barometer, in fact.
However in the event you can’t entry that, you may simply use the VIX.
The course accommodates a bit extra data on a number of different subjects I’ve not talked about right here.
I haven’t given away any member-only data.
Every little thing that I’ve talked about will be discovered on his public YouTube – particularly this one that summarizes his iron condor technique.
The course is for newer iron condor merchants that need in-depth elementary information such because the tradeoff and advantages of wider and longer-dated condors, and so forth.
In the event you perceive the whole lot I stated, you most likely already know iron condors.
You’ll not discover iron condor changes within the iron condor course as a result of he doesn’t imagine in adjusting iron condors.
The way in which he’s layering a number of iron condors and setting early cease exits, I agree that this type of buying and selling iron condors doesn’t require changes.
Generally it’s higher to exit a foul place to reclaim the capital to reset a brand new beginning condor slightly than struggle the market.
Nevertheless, I don’t agree together with his view that each one iron condor changes are ineffective.
My view is that some worthwhile iron condor changes can profit the place if completed appropriately and in a well timed vogue.
So now you have got an thought of his 5 methods by which he’ll present you commerce indicators do you have to resolve to join membership.
Can I take the free trial simply to look at the iron condor course after which unsubscribe?
I suppose you can.
What’s the fee of return of the VTS Iron Condor technique?
In line with Brent’s video, it returned on common 18% per 12 months primarily based on 10+ years of knowledge.
The utmost month-to-month drawdown was 15%.
The typical of the three largest drawdowns is 11%.
When the speed of return is larger than the max drawdown (which it’s on this case), it’s thought of good.
Why did this evaluate go in-depth into the iron condor technique when 4 different methods solely have a cursory overview?
Because the different 4 methods are quick volatility methods, whereas I agree with the idea of shorting volatility and can sometimes do it, I’m not a specialist in volatility buying and selling like Brent is.
Nevertheless, the iron condor is considered one of my bread-and-butter methods, and I’m at all times all for seeing how different folks commerce them.
What does “tactical technique” imply?
Brent at all times makes use of the phrase tactical, as within the VTS Tactical Volatility Technique.
Tactical technique means getting out and in of a place primarily based in the marketplace surroundings and different metrics.
It’s the reverse of “purchase and maintain,” the place you enter and maintain a place so long as you may, no matter what occurs available in the market.
In the event you observe Brent’s work for any size of time, you’ll notice that he’s not a fan of “purchase and maintain.”
Subsequently, he’s “tactical.”
Does that imply that he can time the market?
In a way, sure.
In actuality, he’s timing volatility, which many imagine is less complicated to time than timing costs.
Brent has collected an enormous quantity of volatility information and metrics that he used to develop fashions that assist him time volatility.
He has been doing this for over a decade.
Is Brent a discretionary dealer?
With the understanding that there’s at all times some discretion in buying and selling, I might say that Brent is extra of a non-discretionary dealer than a discretionary dealer.
There may be little or no discretion within the commerce indicators.
It’s not like, “Oh, I believe volatility will go down immediately.”
He inputs a complete bunch of volatility information into his spreadsheets each day, and proprietary formulation inform him the indicators.
After which he trades these indicators.
There is perhaps some discretion within the iron condor technique relating to when to enter them when to layer them, and on which ETF.
However the administration of the commerce may be very rules-based.
There isn’t a discretion in changes as a result of the iron condors are by no means adjusted.
As soon as in an iron condor commerce, the P&L quantity tells you whether or not or to not exit the commerce.
There isn’t a different quantity to take a look at.
There isn’t a different resolution to be made.
There may be nothing else to consider.
What else does the VTS membership embrace?
The iron condor course comes with the iron condor spreadsheet with calculations.
The each day sign e-mail contains the Volatility Dashboard with values for the Money VIX oscillator, M1:M2 VIX futures, VX30:VIX roll yield, M4-M7 VIX futures, VIX:VIX3M Crossover, VRP, and extra.
It additionally contains the crush and surge ranges for VXX, UVXY, UVIX, SVXY, and SVIX.
This can be a nice approach to commerce – simply observe a number of easy guidelines and simply do what the principles let you know.
It takes the guesswork out of buying and selling.
It takes the feelings out of buying and selling.
And it takes the stress out of buying and selling.
There is just one downside.
It’s important to believe within the guidelines for you to have the ability to observe them (particularly when the technique is in a drawdown interval).
Brent has no issues following his guidelines as a result of in the event you watch him speak, you may see he has full confidence in his guidelines.
In any case, he designed them.
The one query is, do you have got confidence in Brent’s guidelines?
For these all for buying and selling volatility, I might encourage you to look at his YouTube channel, learn his weblog, and even strive his free trial that can assist you reply that query.
Brent’s iron condor course is a good begin for these new to iron condors.
Take his free trial to have the ability to undergo the iron condor course and even observe a number of of his iron condor indicators.
Even when you need to pay for one month of membership, that course is properly price it.
We hope you loved this text on our VTS evaluate.
When you have any questions, please ship an e-mail or go away a remark under.
Disclaimer: The data above is for academic functions solely and shouldn’t be handled as funding recommendation. The technique offered wouldn’t be appropriate for buyers who should not aware of trade traded choices. Any readers on this technique ought to do their very own analysis and search recommendation from a licensed monetary adviser.