Strategy lab / 151 Trading Strategies

Strategy lab

Every strategy from 151 Trading Strategies and all 101 Formulaic Alphas as formulas you can edit and backtest on ten years of daily stocks, ETFs, futures, forex and crypto data. Free, in your browser.

Options58

Stocks21

Exchange-traded funds8

Fixed income15

Indexes5

Volatility7

Foreign exchange6

Commodities6

Futures7

Structured assets6

Convertibles2

Tax arbitrage3

Miscellaneous assets4

Distressed assets7

Real estate8

Cash5

Cryptocurrencies2

Global macro4

Infrastructure1

7.3VolatilityBacktest

Volatility carry with two ETNs

Short-term VIX futures products lose value from rolling in contango faster than mid-term ones. Short the short-term fund and hedge with the mid-term fund.

In the paper

h = β = ρ \frac{σ _{X}}{σ _{Z}}

Note. VIXY and VIXM stand in for VXX and VXZ. Spikes in volatility cause sharp drawdowns.

Formula

Edit anything; the result updates as you type. Lines like window = 20 become sliders.

…f("VIXM", returns), 63…IXM", returns), 63) -0.5…-0.5 * is("VIXY") + 0.5

Market

AssetsLoading…

Period

PortfolioUse the formula’s values as portfolio weights directly.RebalanceCosts0 bp

Loading market data and running the strategy…

Hypothetical backtests on daily closes with no slippage unless you add costs. Survivorship bias applies: the stock list is today’s large caps. For learning, not investment advice. Data: Yahoo Finance via yfinance.

Source: 151 Trading Strategies
Section: 7.3 · Volatility
Asset class: Volatility
In the lab: Full backtest

Volatility carry with two ETNs (7.3)

Short-term VIX futures products lose value from rolling in contango faster than mid-term ones. Short the short-term fund and hedge with the mid-term fund.

Key equation

h = β = ρ \frac{σ _{X}}{σ _{Z}}

Lab formula

// Hedge ratio from a rolling regression of VIXY on VIXM
h = ts_beta(of("VIXY", returns), of("VIXM", returns), 63)
-0.5 * is("VIXY") + 0.5 * h * is("VIXM")

VIXY and VIXM stand in for VXX and VXZ. Spikes in volatility cause sharp drawdowns.

How the backtest works

The formula is evaluated for every asset on every day. Its values become positions at that day’s close, using the portfolio rule you pick, and earn the next day’s close-to-close return. Costs are charged in basis points on the amount traded. Everything runs in your browser on daily data from Yahoo Finance, adjusted for splits and dividends.

More in Volatility

Source: Kakushadze, Z. and Serur, J. A. (2018). 151 Trading Strategies. Palgrave Macmillan. SSRN 3247865. Summaries are our own.