It wins 75 percent of the time and still takes the account to zero
When the RSI on VIX goes above 70, one might get the idea that the VIX is due for a pullback so it’s a good time to short UVXY right now.
We pulled up every occurrence where VIX RSI went above 70 since UVXY’s inception date of October 2011. There were 51 of them.
The trade wins 75% of the time. It also takes the account to zero.
| Hold | Median Return | Win Rate |
|---|---|---|
| 1 day | +3.0% | 61% |
| 5 days | +9.4% | 75% |
| 10 days | +18.3% | 73% |
| 20 days | +20.7% | 75% |
A median gain of 20.7% in 20 days, winning 3 times out of 4. On its own that reads like a good trade.
UVXY is a decaying instrument. It’s designed to go lower over time regardless of where the RSI on VIX is currently at.
So the real question is not whether the trade wins. It is whether the trade beats shorting on a random day.
| Hold | Median Return (VIX RSI >70) | Win Rate (VIX RSI >70) | Median Return (Random day) | Win Rate (Random day) |
|---|---|---|---|---|
| 1 day | +3.0% | 61% | +0.9% | 59% |
| 5 days | +9.4% | 75% | +3.6% | 65% |
| 10 days | +18.3% | 73% | +6.8% | 69% |
| 20 days | +20.7% | 75% | +12.3% | 73% |
Shorting when VIX RSI is above 70 has a better median return at every timeframe.
The win rate is also slightly better.
At 20 days, 8 trades went more than 100% against you at some point, which for a short position means liquidation.
Those 8 trades lost 595% while the other 43 made 943%.
| Signal date | VIX that day | Result | Worst Drawdown |
|---|---|---|---|
| Feb 24, 2020 | 25.0 | -344.8% | -758.8% |
| Mar 3, 2020 | 36.8 | -129.7% | -429.6% |
| Mar 6, 2020 | 41.9 | -69.2% | -303.6% |
| Mar 11, 2020 | 53.9 | -5.7% | -180.0% |
| Jul 18, 2024 | 15.9 | +6.2% | -175.6% |
| Jan 30, 2018 | 14.8 | -43.2% | -147.3% |
| Jul 24, 2024 | 18.0 | +15.6% | -136.7% |
| Feb 2, 2018 | 17.3 | -24.4% | -122.3% |
Even though 2 of the trades would’ve ended up profitable, it doesn’t matter because you would never have been able to hold long enough to win, so those aren’t included in our win rate calculations.
It fails because a high RSI reading on the VIX doesn’t necessarily mean the VIX is elevated. The median VIX reading when its RSI is above 70 is only 24.6, which is elevated but nowhere near a panic.
Pick any leveraged ETF and the tool projects how much it will decay from here.
Open the Decay Projection Tool
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