Tuesday, January 3, 2017

VIX and More Newsletter Update as of January 2017

Since it has been over three years since I have posted about the VIX and More Subscriber Newsletter, I believe an update for potential new subscribers is long overdue.

First of all, the newsletter is still going strong and will celebrate its nine-year anniversary in April.  Over the years, the content has continued to change and the newsletter has grown as new products have hit the market, global macro issues have exerted a stronger influence on volatility, subscribers have requested new types of content and my research interests have evolved.

In its current format, the newsletter is about twelve pages long and is emailed out every Wednesday evening.  The sections of the newsletter are largely fixed for now and are as follows:
  1. Market Commentary – My recap and analysis of the most important events and numbers impacting the financial markets over the course of the past week, typically including graphs of the SPX, the VIX and at least one market sentiment indicator.
  2. Volatility Overview – A discussion of what happened in the world of volatility during the past week, encompassing historical (realized) volatility as well as implied volatility.  While the main focus is the VIX and other U.S. equity volatility indices, I also discuss VIX ETPs, foreign equity volatility indices, volatility indices across a broader range of asset classes (commodities, currencies, bonds, etc.) and a select group of volatility ratios I monitor closely.  This section includes one graphic of the VIX vs. multiple measures of SPX historical volatility as well as a table covering the performance of 24 of my favorite volatility indices, ETPs and ratios.
  3. VIX Futures Term Structure Here I comment on the VIX futures term structure and discuss the term structure relative to several historical reference points, seasonal factors and other anomalies.  Two separate graphics present the term structure relative to historical data.
  4. Trading Volatility and the +XIV IndexThis is typically the longest section of the newsletter and makes use of my proprietary +XIV Index, translating this index (which has shown a strong predictive ability for VIX ETPs for the next 1-2 weeks) into more actionable trading ideas.  The balance of the section examines new and existing options trade ideas (involving primarily SPX, RUT, VIX, VXX and a handful of highly liquid commodities and equities ETPs), including thoughts on position management and related matters.  Typically, there are one or two tables used to monitor open trade ideas, with performance and other relevant data.
  5. Risk Assessment:  Evaluating Relative Risk and Volatility in Asset Classes, Geographies and Sectors – This section drills down on where some of the risk outliers are across the full universe of asset classes, geographies and sectors.  Here is where one is most likely to find an early warning signal for the next evolving risk area as well as identify areas where risk is overpriced or under priced.  This may be my favorite section to write each week, as it is always topical and helps to put a wide range of current threats and opportunities into perspective, including some analysis of the key drivers of risk in each area.  Each week, three separate graphics highlight the top five areas of highest relative risk in terms of asset classes, geographies and sectors.
  6. Probability of a Third Rate Hike, Based on Fed Funds Futures Data – This section was inspired by the 2013 “Taper Tantrum” following Ben Bernanke’s first mention of the Fed’s intention of cutting back on monetary stimulus measures.  In this section I translate futures data into forward-looking probabilities and trends, overlay my own thinking and discuss issues related to the Fed, interest rates and central bank policy in general.  There are one or sometimes two graphics related to interest rate expectations here.  (The section title is a lot narrower than the target subject matter.)
  7. Featured Chart(s) and Commentary – The best part about this section is that it gives me an opportunity to drill down on one or more issues that may not fit neatly into any of the other sections.  Typically, there are anywhere from one to four charts covering one or two subjects that range from economic data to market sentiment to political developments, often using making use of my proprietary indices and research to highlight areas of current and evolving importance.  In football parlance, this is where I get to call an audible at the line of scrimmage.
  8. Current Investment Thesis – The flow of the first seven sections typically provides a natural lead-in for my current investment thesis – which is typically a multi-part thesis.  Here I summarize my short-term tactical thinking about the financial markets as well as offer up an intermediate-term or sometimes long-term perspective on where I believe things are going.  I touch on what is driving my investment thesis, what key milestones lie ahead and how I am positioning myself to take advantage of those opportunities.  I endeavor to make this a make this a wide-ranging investment thesis, incorporating equities, volatility, ETPs from across the asset class spectrum, as well as geographies and sectors.  While my focus is generally on growth and speculative opportunities, depending upon the state of the markets, I typically also delve into some hedging ideas as well as some income-oriented trade ideas.  Last but not least, each week I offer up a list of my favorite ETP trading ideas and the rationale behind these trades, typically with three new long or short ETP trading ideas added to the list each week. 
Once a year I also formally survey subscribers to get their input on how the newsletter can be improved.  This means that while the general structure and format of the newsletter remains similar from year to year, as market conditions and subscriber input warrant, new sections can crop up at any time and old sections may morph into something different or be dropped altogether.

For those seeking additional information on the newsletter, I am offering a 14-day free trial (see top of right column) to the subscriber newsletter for all new subscribers.

[Additionally, for those who may be interested exclusively in trading VIX ETPs, my VIX and More EVALS (ETP Volatility Analysis Long-Short) model portfolio service is certainly worth investigating.]

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Disclosure(s):  none