Improving the S&P Dynamic VIX Futures Index: The Mojito 3.0 Strategy

9 Pages Posted: 19 Dec 2013  

Chrilly Donninger

Nimzowerkstatt OEG

Date Written: December 17, 2013

Abstract

The Mojito 2.0 strategy was developed. The Mojito is an improved version of the S&P Dynamic VIX futures index. The general idea is to trade combinations of short- and mid-term VIX futures indexes. The Implied-Volatility-Term-Structure (IVTS) is used to define different volatility regimes. The weights of the short- and long-term VIX futures indexes are adjusted accordingly. It was recognized in that there is linear relation between the VXX (short-term) and VXZ (mid-term) index ETFs. Hence the Mojito 2.0 switches only between a short, neutral or long VXX position. This working-paper applies ideas from the HeroRATs strategy to the Mojito. The HeroRATs introduced the new VIX-short-term-index VXST and removed IVTS spikes with a median filter. The VXST contains for the Mojito no valuable information. But the median-5 filter is a clear improvement. This working paper improves also the regime-thresholds of the strategy.

Keywords: Implied Volatility Term Structure, VIX ETNs, Market Regimes Classification

Suggested Citation

Donninger, Chrilly, Improving the S&P Dynamic VIX Futures Index: The Mojito 3.0 Strategy (December 17, 2013). Available at SSRN: https://ssrn.com/abstract=2369260 or http://dx.doi.org/10.2139/ssrn.2369260

Chrilly Donninger (Contact Author)

Nimzowerkstatt OEG ( email )

Altmelon 110
Arbesbach, Lower-Austria A-3925
Austria

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