ULTRA Financial Systems

Phenomenal Results in Three Minutes a Day
(SDVIXC) 03/05/03

The following composite strategy is a simple, same-day strategy that is very easy to trade. It utilizes the new CVR system with some existing ULTRA systems.

@sys
fri,1 // A/D > 1.4 on EOW
thur,1 // A/D > 1.3 on Pre-EOW
cvr,2 // V1, V3, V8, V9, V10, 2+ req'd
vixbp,1 *ND // V2, 4% SP500 Stop
vix,1
@ball
0,0
1,0
2,100
@end

System Descriptions

FRIDAY

This system should be set up with BBL=1.4, BBH=10.0, DAY= END of Week.

Data Needed: NYSE Advances, NYSE Declines.

This system models buying at the close on a day if it's the last day in the week (usually Friday) and if the ratio of NYSE Advances divided by NYSE Declines is > 1.4. Sell at the next close (Usually Monday).

From 1942 to 03/05/03 this simple strategy has produced:

Winners: 59% (19 trades per year)
Maximum Drawdown: -7.0% in 1946
Gains at +59.1% annual rate while invested (7.4% of the time)

THURS

This system should be set up with BBL=1.3, BBH=10.0, DAY= Pre-end of Week.

Data Needed: NYSE Advances, NYSE Declines.

This system models buying at the close on a day if it's the next to last day in the week (usually Thursday) and if the ratio of NYSE Advances divided by NYSE Declines is > 1.3. Sell at the next close (Usually Friday).

From 1942 to 03/05/03 this simple strategy has produced:

Winners: 67% (19 trades per year)
Maximum Drawdown: -8.7% in 1988
Gains at +80.3% annual rate while invested (7.3% of the time)

CVR

This system should be set up with V1=1, V2=0, V3=1, V5=0 V8=1, V9=1, V10=1, V11=0, B_MV=1, I_NV=2

Data Needed: VIX, VIXO, VIXH, VIXL, SP500 Open

This system is new in ULTRA 7.20. It consists of ten components that attempt to pick bottom using various formulas involving the VIX indicator. The optional settings we recommend above use variations V1, V3, V8, V9, and V10. For a buy signal to be in effect two of those variation must be on buy signals. Exact formula for CVR is available at Help/System Formula/CVR.

From 01/02/88 to 03/05/03 this strategy has produced:

Winners: 60% (19 trades per year)
Maximum Drawdown: -8.3% in 1991
Gains at +61.6% annual rate while invested (9.9% of the time)
Annual Return: +10.1% compared to +7.7% for the SP500

This strategy significantly outperforms the SP500 with very little risk. While the SP500 was down -49% in Oct02, CVR has never been down more than 8.3%. CVR is also unique as it attempts to pick bottoms. This characteristic makes it superb in combination with other types of systems.

VIXBP

This system should be set up using variation 2: V2=1, BGT2=28, SLT2=28, SON=1, STOP=4.0

Data Needed: VIX, SP500

This system is traded NEXT-DAY as indicated by the *ND above. Historically, it has been very successful at picking bottoms. A complete description is available via the System/Options menu item.

From 01/02/88 to 03/05/03 this simple strategy has produced:

Winners: 66% (7 trades per year)
Maximum Drawdown: -10.7% in 2000
Gains at +77.24% annual rate while invested (7.8% of the time)
Annual Return: +9.6% compared to +7.7% for the SP500

VIX

Data Needed: VIX, SP500

VIX_RSI = 5-Day RSI of VIX. Buy if VIX_RSI (Yesterday) > 70 and VIX_RSI (Today) < VIX_RSI (Yesterday) Sell upon the violation of a 1% SP500 trailing stop.

SDVIXC Composite Strategy

As you can see from the composite defintion at the top of this page, a point total of two is required for the strategy to buy. This can occur is CVR goes on a buy signal or if two of the other systems are on buy signals.

All of the systems must be analyzed on a SAME-DAY basis except for VIXBP. This can be done in less than 3 minutes as the market is closing with the following method:

Create the Composite definition by selecting File/New and copying the information at the top of this page starting with "@SYS" and ending with @END. Save the file under the name SDVIXC.txt.
Set up the options for FRIDAY, THURS, CVR, and VIXBP as described above.
Daily, add a dummy data record by selecting Data/Add Data and clicking on "FILL". This fills the data record with the prior day's data.
Daily, fill in the data items: SP500 Close NYSE Adv NYSE Dec VIX VIX Open VIX High VIX Low SP500 Open With the most accurate pre-close data available.
Daily run a Timing/Date Analysis (Composite) on SDVIXC.txt to determine whether or not a buy/sell signal has occurred.

The daily steps 3-5 takes less than 3 minutes.

The daily data items are available in real-time on the internet.

VIX data is here .
SP500 data is here .
NYSE Advances/Declines is here .

This may seem like a lot of work. However, in these difficult times it is wise to take a low-risk approach to the market. At some point in the future trading higher risk, NEXT-DAY strategies will be prudent but probably not currently.

SDVIXC Historical Results

Starting Date: 02/22/88
Ending Date: 03/05/03

SP500 Buy And Hold Results:
Total Gain: +212.04%
Maximum Drawdown: -49.15% on 10/09/02
CAR: +7.86%
Ulcer Index: 14.19%

Composite System Results
Trades: 439 (61.28% Winners) 29.18/year Ave.
Gain Per Trade: +0.56% Largest Gain: +12.69%
Largest Loss: -5.47%
Max. Drawdown (peaks): -9.62% on 07/01/02 (a)
Max. Drawdown (entry): -5.47% on 09/18/01
Total Gain: +983.58% CAR: +17.16% (b)
Percent Invested: 20.50% (c)
Percent long: 20.50%
Percent short: 0.00%
CAR While Invested: +75.55% (d)
Ulcer Index: 1.65%

This strategy captures the 21% of the time (c) that the SP500 appreciates at a 76% annual rate (d). It has returned 17.2% annually (b) with a maximum drawdown of only -9.6% (a). Since this strategy is only invested 21% of the time, it is by nature, low-risk. One important and often overlooked measure of risk is how often you are "at risk".

ULTRA Financial Systems Inc.
P.O. Box 3938, Breckenridge CO 80424
Phone: 970-453-4956 Fax: 970-453-2467