Much to my delight, July saw the return of some decent volatility, particularly toward the end of the month. You can see the VIX chart below (the index that tracks the implied volatility of the SP500), which tells the story quite nicely:
When trading with a strategy which thrives on volatility, this is a welcome site. Consequently, the second half of July was quite active and enabled my Covestor.com portfolio to end the month +5.92%. Increasing volatility results in more activity in my account. If one has an edge in his trading strategy, then more trades = more profit.
Sadly, increasing volatility is frequently associated with bear markets, or strong down-trends. This was no exception. The last several days of July ushered in a rather strong correction, which continues into the first few days of August.
You can see that this chart of the SP500 is almost the inverse of the VIX chart. That’s usually the way it goes. It appears, that in spite of the debt ceiling debacle being set aside, that investors are starting to show their concern over the state of our economy.
To learn more about how volatility trading systems work in the context of corrections and bear markets, you might read my 6-part series called “Profiting in a Bear Market”. It’s largely the story of how my MultiStage Trading System – a volatility based strategy – fared during past bear markets and in times of high volatility.
Good Trading.
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