VIX ETP Performance in 2014

As pointed out by my friend @stkbullgod the VIX ETPs had an interesting year. Check it out:

VXX - 25% YTD SVXY - 11% YTD

VXX – 25% YTD
SVXY – 11% YTD

One would expect SVXY to be UP around 25% given where VXX is but that is not the case. There is a 36% difference! The VXX borrow rate was ~5% on last check so let’s say 30%. Similar results with XIV (I focus on SVXY as it is an ETF with options as opposed to XIV which is an ETN). This is likely due to compounding issues with any inverse ETF product, a topic that has been readily discussed. Just to make sure, let’s look at a period in 2014 where SVXY was steadily rising and we should see it outperform a short VXX strategy.

VXX -35% SVXY +48.5%

VXX -35%
SVXY +48.5%

So there’s about a 13% delta in performance during this sample from April 1st to July 1st. On the short side, XIV is usable as well.

I was about to run a back test and then found that I already did this so I just updated till today:

No Borrow Cost Included

No Borrow Cost Included

There is no rebalancing in the above test, starting with an initial 100k short of XIV and VXX. Here is rebalancing profits yearly:

XIV-VXXret3

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~ by largecaptrader on January 5, 2015.

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