gfp: Believe it or not I came up with the strategy all on my own. I know that in secular bear markets the volatility level goes way up. There are psychological reasons for it. A long prolonged Bear market happens in stages, with intermittent face ripping rallies. Look at this past 6 weeks. The S&P dropped 20% in a few days and has regained almost all of it in less than 5 weeks. That keeps the frogs in the pot. The next drop should bottom out at a lower low than we saw in early April. Then rebound to another lower high. And so on. I wanted a trading strategy that could benefit me in both directions if I timed it almost right. Now look at the one year chart on UVXY. Most of the time it hovers between $17 and $19. It can stay in this channel for months. Then a big spike comes around and it can double or even triple in a short period of time. So the key is your entry. If you buy it right, and have patience, and are willing to wait out some paper losses, you can wait for the next shoe to drop. Those ugly short term fear driven market drops usually don't last long. Less than a week. You can see the trading numbers and watch for when the panic selling and forced selling is over. Trading volumes drop significantly even as the indexes may still be dropping. That indicates that the drop momentum is subsiding. That's when you start scaling out of UVXY, maybe 20% at a time. Then you wait to confirm the VIX is heading back down. Then you go into SVIX. The VIX inevitably goes down. It never stays high for too long. This strategy can be followed over and over again because a secular bear market can last several years before we get to a final capitulation bottom. Those usually occur with a whimper. By that time all the bag holders have lost most of their capital as they repeatedly bought high and sold low during the process. And the market needs this to happen. It can't take all of the investors money in one fell swoop. Periodic rallies have to happen to give punters hope that they can regain their losses. The market gives them that false optimism which morphs into FOMO. They jump back in only to be crushed again. The average secular bear I believe loses 65% from all time high to capitulation low. A few secular bears have been worse. The 1929 Crash and the Dot.com bubble bursting are notable outliers that were worse from top to bottom. But even if we just drop the average amount it will wipe out 2/3 of the baby boomer pensions and savings in America. It could usher in another Depression.
AI
