Model Overview
The Apis Volatility Insight Model (AVIM) provides useful information on the possible direction of the S&P 500 index and its volatility derivatives, including the VIX index and VIX futures. We believe that volatility market data is a leading indicator of both future market movements, as well as movement in volatility based products. The model is the culmination of our team's research work, synthesizing over 20 years of volatility and options trading experience with quantitative analytics supported by machine learning. The model is currently used in both our ACM Market Neutral Volatility Strategy Fund as a primary alpha generator, and in the ACM High Yield Fixed Income Fund, as a dynamic hedge.
Current Signal VXX
Current Signal SPY
As of Market Close 8/11/2020
Model Strategy
The AVIM uses volatility data to synthesize a predictive output regarding the direction of the S&P 500 index (tradeable as SPY) and volatility derivative products. Of the latter, the only product available that meets the AVIM's criteria is VXX, a volatility based ETN issued by Barclays' Bank.
The model provides a daily signal at EOD for both SPY and VXX. In its own trading, Apis uses the model's signals on an intraday basis, and it is used both as its own primary trading strategy, as well as a dynamically applied portfolio hedge in volatile markets.
In general, during periods of calm markets, the model will be short VXX and flat SPY. This is because our research shows that during bull markets, short volatility results in better performance than simply being long SPY, primarily as a result of the stronger force of contango in the VIX futures as compared to the upwards momentum of the S&P 500 Index itself. There is an argument to be made that replacing short VXX with SPY may be safer, due to the index not being as susceptible to large moves as large as the volatility products. While our opinion is that even with this consideration, short VXX results in better risk adjusted returns over the long term, the decision to use "Long SPY" instead of "Short VXX" is one that should be made individually based on each manager's criteria.
In times of market stress, the model will often be flat both VXX and SPY, and then switch to long VXX when indications of sharply increasing volatility are present. In those cases, the model will be long SPY as well, because typically those periods are short, and result in a recovery in the index. When used as a hedging mechanism, however, the model would be both long VXX and short SPY, since it is offsetting losses in an underlying portfolio.
Historical Signals
7/15/2020 VXX: Short SPY: Flat
7/13/2020 VXX: Flat SPY: Flat
7/10/2020 VXX: Short SPY: Flat
7/09/2020 VXX: Flat SPY: Flat
Disclaimer and Disclosures
The Apis Volatility Insight Model (AVIM) is not intended as investment or trading advice, and Apis Capital Management (ACM) is not an investment advisor to the public. ACM takes no responsibility for the timeliness of publishing the AVIM signals. ACM may benefit from others making trades based on the model, as it will generally hold a position in the direction indicated by AVIM in one or more of the funds that it manages prior to the publishing of the EOD signal. ACM uses the AVIM model on an intra-day basis and may receive multiple signals from the AVIM each day. Only the final signal in effect at EOD is published. ACM expects that its use of intra-day signals from the AVIM model will result in improved performance compared to using EOD signals.
The model's hypothetical performance does not take into account trading costs such as commissions, fees and slippage. These costs can be significant and may result in substantially reduced profits or losses in actual trading. Signals generated prior to 8/4/2020 are based on backtested data and/or reconstructed from AVIM intraday signals, and may not be an accurate representation of actual signals that would have been generated by the model during that time due to limitations in the accuracy of the backtested data or other factors.
Reproducing or sharing the AVIM signals published here is prohibited without ACM's express written consent
Trading equities or futures is not appropriate for all investors, and the risks of equities or futures trading can be substantial. All investors should carefully consider whether equities or futures trading is right for you in light of your particular circumstances and financial resources. You you acknowledge that you have not sought advice from ACM regarding the appropriateness of equities or futures trading for you, and ACM has not provided any such advice to you.
You agree and acknowledge further that the trading signals provided to you by ACM (trading signals) are not, and are not intended to be, an offer or solicitation to enter into any equities or futures transaction, or any type of trading or investment advice, recommendation or strategy. You acknowledge that it is solely your decision to determine which, if any, AVIM trading signals to use for trading (whether actual or simulated) at a Broker Dealer, Futures Commission Merchant or other financial institution (collectively referred to as “Financial Institution”), and whether to send all, some, or none of the AVIM trading signals to such Financial Institution for execution.
You understand that past performance associated with any trading signals offered by AVIM, whether actual, hypothetical or historically “back-tested” is neither necessarily indicative of nor a guarantee of future performance or success.
Trading AVIM signals may result in the total loss of the funds that you deposit at a Financial Institution, and you may incur losses in excess of your deposits. Leverage can work against you as well as for you, and can lead to large losses as well as gains. Moreover, funds held at such Financial Institution are typically not guaranteed or insured against misappropriation or the bankruptcy of the Financial Institution. You should only trade equities or futures with funds that you can afford to lose.
Based on the foregoing, you agree that you shall not seek to hold ACM responsible for any losses associated with any trading signals provided to you by ACM. In the event that any claims, suits, actions, damages, liabilities, obligations, losses, or expenses (including reasonable attorneys’ fees) arise out of or relate to the relationship between ACM and you, and/or any trading signals provided by ACM to you, you agree to indemnify and hold ACM harmless therefrom.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER ASPECTS OF THE EQUITIES AND FUTURES MARKETS. YOU SHOULD CONSULT WITH YOUR FINANCIAL ADVISOR PRIOR TO TRADING