Hmm...so you wouldn't be inclined to draw anything from any type of reanalysis done pre 2009? The trend is certainly pronounced so there is a valid argument to be made there.
what does volume have to do with how they trade? when i started in these i acted as if i had a lot to learn and did not presuppose conclusions. i'm glad i did. its ridickculous how much trends and patterns have changed since 2009, etc. good luck
Again, average daily volume for anything is highly misleading, but for VIX it is almost by definition a misleading metric. The nature of the VIX beast is that most of the annual volume is going to happen in a very few days of the year. The distribution of volume may be relevant (or not), but average daily volume is almost certainly not relevant to anything.
If there was anything to be learned, surely the sell off in August of 2015 would have displayed similar characteristics don't you think? So how do you explain the fact that anybody who was trading a VRP (volatility risk premium) strategy or a mean reversion strategy got their arse handed to them in the most painful and punishing way? How do you explain the fact that during the largest percentage move the VIX has seen in 27 years, from 13 to 53 in a week, that those trading signals were still flashing a Long XIV position all the way to the bottom of the 12.2% sell off in the S&P 500? For me, I don't pay any attention to curve fitted backtesting, so my XIV trading system actually made 20% during that time period. I'm not a blind data miner trading VRP and mean reversion strategies because they happen to have worked in a 20/20 hindsight curve fitted backtest based on simulated data that is irrelevant. For anybody foolish enough to pay attention to "broader trends" as you call it, they lost anywhere from 30-50% of their fund. Any data before mid 2012 ish belongs in the garbage.
That 13 to 55 was just buried leverage liquidations... Guys sitting heavy duty on short puts spx ..short vix calls and any other form of short vol premium....
From the perspective of pricing of the instruments that trade based on volatility, it makes no difference what the reason behind the move was. All that matters is, the S&P 500 has made many moves of similar characteristics over the years, yet the VIX and VIX futures never have, at least not since the crash of 87' Point being, anybody who was putting any confidence at all in past simulated data for the XIV got burned and burned badly. Why? Because that simulated data didn't exist in the real world. Live trading is a totally different animal to simulated back testing. That is my only point here. People who think XIV prices would have matched up to that simulated back test are not understanding the nature of the product. XIV derives it's price based on futures. But the existence of XIV itself takes trading volume away from those same futures, as well as away from S&P 500 options, which also changes the values of the VIX index which is derived based on S&P 500 options. The launch of the spectrum of volatility products and the volume of trading in them changes all previous simulated data, making it all but useless. I don't know about you, but as a math and statistics guy I feel that corrupted data is not worth using.
I really like investing in inverse volatility using XIV and more recently ZIV especially after big market panics that result in steep sell-offs. I feel like the price discovery mechanism embedded in markets is designed to reduce volatility over time which tends to make inverse volatility a naturally appreciating asset. In addition, markets usually want to price future volatility higher than current volatility creating this perpetual contango in a persistently decaying asset. Take a look at the steep decay rate of VXX over its life since inception and you'll see what I am talking about. Also take a look at how well these inverse volatility ETFs held up during the most recent flash crash on 8/24/15...I saw a lot of crazy pricing that morning in several "safe" ETFs. I do understand the fear and dangers of being short volatility however I still believe that being short during times of extremely high volatility is an important income producing component of any well balanced portfolio. As with anything, don't over do it and be long term...besides whats the worst that can happen, the ETF can go to zero just like a lot of other "safe" ETFs.
Although I hold the same idea as you that many of the VRP or term structure algos did not fare very well in the past 3 years, there are still some other even simple TA trading systems still working. One of my old systems I developed in 2011 around the debt+Greek crisis was still able to get my ass out of trouble before 08/19 and 12/09 this year. I have to admit it was lucky but somehow the VIX pattern before a "gradual" VIX spike could still give you enough time to get out of the mess. In addition to the long term EOD data, using VXX intraday data to deal with some day trading like fading the gap or chasing the gap is also meaningful. The human behaviors in those big gaps following certain events like announcement of bailout, really bad eco data remain similar in the past century, I guess. You can play with such gaps using S&P futures but the VIX futures or ETPs may offer you even greater opportunities. In this sense the old VXX data back to 2009 still could give you quite a lot of information.
If you've found a way to make those types of signals work for you then go for it. The problem though is there is a fair amount of interpretation in them. Anytime you're going to include any kind of macroeconomic signals in a trading system it often goes contrary to what the statistical based signals are saying. Then you always have that decision to make. Are you going to follow the systematic signals, or the news based or macroeconomic ones? They very often contradict. For me I like to stick to the math 100% and ignore everything else. I've got 9 input variables and when all 9 flash a certain direction, I go with the trade. If they don't, I'm in cash. This does mean I'm only allocated in trades roughly 60% of the time, but my results have been very smooth as a result because I get so few false positives. I have always felt the key to trading these ETF's is to avoid ambiguous middle ground signals that very often fail and drag down long term returns. As far as useful data before 2009, of course it's not completely useless. There is always things to learn from data. My point was though, the data is so sparse, completely backtested, with very low trade volume. The volatility space in 2015 is radically different than it was in 2009 and before. So sure go ahead and use some data from before 2009 to get some basic systematic signals in place. But it would be a mistake to think anything before around 2013 means much in the XIV trading world. This is a space that changes quickly. I see my competitors showing flashy backtests of their systems that did very well before late 2012, but since then are completely flat. I can't accept this, so my system is constantly evolving with the efficacy of the new stronger data. As a consequence my results are just as strong today as they were 2, 3, 5 years ago. In my business I don't even show backtests before the XIV was launched because I find them all but useless. But to each his own right.