The Longest Period during Which VIX is below a Specific Level

The VIX is very low this year with only sporadic/periodic spikes to low 20s. This give a big boost to XIV (up 75% YTD) while VXX is bleed to death (down 60% YTD).

However, due to those sporadic spikes, almost all of my strategies haven’t performed well. In this low VIX environment, the trend following strategies tend  to sell at the best buying opportunities. It seems a buy and hold approach will outperform most strategies. I observed that although VIX spikes periodically, the maximum peak doesn’t exceed 24. If this pattern holds for a long time, say a few years , buying and holding XIV will do very well. This motivated me to crunch the data to find out what’s the longest period during which VIX is below a specific level in a row.

The results are shown in the following chart and table. It turns out the 24 is actually a significant level for VIX. There’s a big jump (doubled) from 832 to 1658 days during which VIX is below 23 and 24, respectively. I can imagine XIV will probably go to the roof during such period because VIX futures will be in contango most of the time in this low price range. It may be a good idea to just buying and holding XIV as long as VIX is below 24. 

This is also a similar jump (more than doubled) from 2197 to 4725 days when VIX level is changed from 45 to 46, which indicates 46 is a significant resistance for VIX.

It’s also surprising to see that how long VIX can be a below a level in a row. For example it can be under 13 for 115 days in a row, that’s almost half a year. The average Contango is probably about 9% / month at such low level. That means XIV will probably gain about 50% from roll yield only during such a period.

Also note that VIX can be below 24 for 1658 days in a row, that’s about 7 years in a row. I can imagine that holding XIV for the whole period will sure do extremely well.

It seems we can also assume that it’s a bull market if VIX is consistently below 24. In such market conditions, mean-reversion out-performs trend-following strategies. An idea is to buy into XIV whenever VIX spikes and sell XIV when VIX is in the bottom range. This basically confirms the idea I posted at https://yimapo.wordpress.com/2013/10/08/no-bear-market-vix-20/

 

VIX Level	Max Days Below
10	4
11	10
12	37
13	115
14	133
15	205
16	273
17	297
18	447
19	487
20	558
21	594
22	785
23	832
24	1658
25	1675
26	1713
27	1713
28	1714
29	1714
30	1714
31	1714
32	1716
33	1716
34	1718
35	1718
36	1718
37	1981
38	1981
39	2189
40	2190
41	2190
42	2190
43	2190
44	2190
45	2197
46	4725
47	4730
48	4730
49	4730
50	4730
51	4730
52	4730
53	4731
54	4732
55	4732
56	4732
57	4732
58	4733
59	4733
60	4733
61	4733
62	4733
63	4733
64	4734
65	4734
66	4734
67	4734
68	4734
69	4734
70	4739
71	4744
72	4744
73	4744
74	4744
75	4744
76	4744
77	4744
78	4744
79	4744
80	4745
81	5989