We apply a medium-term absolute momentum model and a set of volatility measures to the major index (SPY, GLD, IWM, etc.) and volatility ETFs (XIV, VXX, VIXM, ZIV) and take positions via long call and put options or by buying the underlying ETFs (in the case of the volatility model). Our trend service utilizes three distinct directional strategies - all quantitative - to adjust to market conditions. This provides retail traders with a complete directional trading model that benefits from the inherent asymmetries in options, allowing for greater gains with reduced market exposure.
Interested in learning more? Visit our Trend newsletter service registration page and take advantage of our free trial:
The following chart shows the performance of the Trend newsletter since the launch in April 2017. Closed positions reflect the realized gains (as of the end of the previous month) while positions listed as "open" are priced based on the value of the ETF or options contract(s) at the close of the last day of the month (gains are unrealized as of the month's end).
|Starting capital||$10,000||Total Returns||$2,855.24|
|ETF||Option||Contracts/Shares||Open Price||EoM Price||Return %||Model|
|VIX||18Oct 20/30 C (L)||2||0.45||0.3||-33.33%||-$30.00||hedge|
|VIX||18Oct 12/10 P(S)||2||0.74||0.6||18.92%||$28.00||hedge|
|SPY||17Nov 240C||1||10.7||11.5||7.48%||$80.00||spy trend|
|Underlying||Option||Contracts/Shares||Open Price||Close Price||Return %||Net||Model|
|SPY||29Sep 235 Call||1||10.00||9.71||-2.90%||-$29.00||SPY Trend|
The Quant Models Behind Our Trend Strategy
How do we maximize profits while minimizing drawdowns in our Trends newsletter? We rely on three distinct quantitative trading models.
Average hold time: up to 6 months
Average hold time: 1-3 months
Average hold time: 5-20 days
What to Expect from BetterBeta Trading's Trend newsletter service
- In a typical month, we have 10-12 trade alerts to open, close or roll options positions. For example, we may have long call in SPY and sell a weekly SPY call against it. When we reach the expiration for the short call, we often sell the next week's expiration, assuming the longer term long SPY signal is still in effect. We never sell unhedged options so subscribers always know their max risk on any position.
- Like all classic trend following strategies, the SPY trend and index reversal trades feature trailing stop losses that allow us to let the winners run while closing any trades that fail to move in the expected direction.
- Depending on the strength of the market's trends, we may have 4-5 open positions at any one time. The recommended sizing of the positions is based on starting capital of $10k. Subscribers can scale up or down as they choose to match their available feel of capital and to use the signals we publish.
- As a new subscriber, you can either open positions to match our current open positions or wait for future trade signals.
- All trade alerts are issued to our subscribers via email and a private twitter feed. The open and closed positions are also updated on our website in the Trend subscribers section.
The following is the walk-forward (not historical) performance of the three strategies that make up our trend newsletter trade signals. This approach is a change from the previous trend service strategy which ran from August 2014 to March 2017 (historical performance available here). Although the previous service was profitable, we chose to modify the approach to simplify the service, employ models with higher profit factors and incorporate the use of volatility ETFs now that their liquidity has improved substantially.
Please note: the results below uses only ETFs to generate these returns. In our "live" newsletter, we use both volatility ETFs and options on ETFs such as SPY, IWM, QQQ and GLD.
All performance numbers (net, gains, losses) are $usd per share (non-compounded). As an example, the $225.47 net for the volatility model is for a single share - multiple that by the number of shares owned to calculate your projected returns. Profit factor is calculated by dividing the total gains by total losses. The volatility and SPY trends backtests are from December 2010. The start date for the reversal model is December 2011.
|Models||Volatility ETFs||SPY Trend||Index Reversals|
The volatility model - both long and short volatility via ETFs linked to VIX futures contracts - has been largely short volatility. The sizable gains in 2011 were due to the model's switch to long volatility as the equity markets pulled back.
The SPY model above features long equity exposure only. When equity markets sell off, we use long volatility ETFs and the index reversal program when/if there are trade signals. The flat lines in the trend model occur when there is no SPY position. This typically coincides with a drawdown in the buy and hold approach.
Become a Trend Subscriber
Part of trading success is finding a strategy that works for your timeline, risk tolerance and personality. That's why we offer a free, no-risk 10 day trial. Simply sign up and see for yourself how BetterBeta Trading's Trend newsletter service can improve your trading.