VIX Option Strangle

This option strangle is effectively short volatility. It buys long dated puts at the money and protects the position with long dated calls far out of the money.

The return is a solid 15% and the maximum draw-down 27% on these parameters. The positions are rolled monthly. Annualized monthly volatility of returns is a fairly hefty 24%.

However the strategy is less likely to go bust than shorting the futures and has limited liability. Perhaps a better way of shorting volatility than buying funds like XIV (now deceased).

Regardless, I don’t think I will be trading it again. Future performance is always worse and draw-downs greater than back testing suggests.
Been there, done that, don’t feel like getting burnt.

See the code and results below or on Gist.

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