I was fortunate enough to have been one of the first readers to stumble across The Aleph Blog, authored by David Merkel, and have a been a big fan ever since. Earlier this week, for instance, I linked to his ideas for reducing portfolio risk and for thinking about the Fed Model. Today I am pleased to be able to recommend his thoughts on the VIX, which he began presenting in the last 24 hours. In what should be required reading for all VIX aficionados, David has (so far) laid out some of his thinking about this VIX as follows:
- Is the S&P 500 30% Undervalued? – on the relationship of the VIX to the SPX, mean reversion, etc.
- For Wonks Only – The Math of Volatility Mean Reversion – the title says it all
- More Slick VIX Tricks – on incorporating the VIX into trading strategies, using the VIX to estimate the beta of common stocks, etc.
I have no idea how much more The Aleph Blog will have to say about the VIX, nor how often he will weave this subject into future writing, but I can encourage you to check out past and present posts, even if you are not one of those people who think the VIX may turn out to be the salvation of western civilization.
Bill, thanks for the post. I am very grateful for your early patronage of my blog. It has grown beyond my expectations.
ReplyDeleteRegarding more posts on the VIX, last night was meant to be a "brain dump" of sorts. I don't have anything further planned to write about, though if anyone wants me to run through specific strategies, I can do that... I am just less certain about differentiating between specific strategies, though I think the concepts work generally, and I have made money off them.
You remember I was initially skeptical about VIX ideas being better than simple technical ideas, but then, ah, THEN, I simplified my VIX ideas and lengthened my time horizons, and voila! I have a good timing idea for the VIX, that backtests even better than the EMA idea I sent you, and trades only a little bit more often (3 every 2 years on average). I'll do a post on it later …
ReplyDeleteOh, I love the idea of using VIX indirectly on bonds. Makes me wanna be Bill Gross! No, not really.