Shadow Vega – Choosing a portfolio

There are two variations of Shadow Vega (SV). First that they have in commons:

• For SVXY signals, they trade 100% of the portfolio. For VIXY signals, they trade 50% of the portfolio. The reason for this is want equal volatility exposure on each trade. SVXY is .5x the VIX for VIXY is 1x of the VIX.

The strategy is very simple with only two parameters. For one of the parameters, the values are the same for VIXY & SVXY for Alpha. But for Gamma the parameter value is different because Steve wanted more trades for VIXY. Think of it this way. Say we are using a close above a moving average as our entry signal. Say the length of the MA is 50 for both SVXY and VIXY. This would be Alpha. But for Gamma, we use 50 for SVXY and 20 for VIXY. This would generate more trades for VIXY.

This really is the only difference. Now which to choose?

Alpha: Cesar likes this one because it is simpler.

Gamma: Steven likes this one because it is exposed to VIXY more and therefore has more chances for large wins.

Shadow Vega: Have a plan

One of the advantages of using a quantitative trading system is that there aren’t a lot of day-to-day decisions to make about your trading. The basic plan boils down to “see the signal, take the signal. “ However, there are still times that we must do something a little different, and when those conditions occur, it’s best to already have a plan in place.

Because the Shadow Vega (SV) strategy trades only two ETNs, there are some special situations that we need to consider. The first and most likely is the possibility of a market shock that causes volatility to spike. If we are currently holding VIXY, then an upward spike in volatility won’t be a problem, as the price of VIXY generally moves in the same direction as overall volatility. However, if we are holding SVXY, then it’s possible that our position will suffer a significant loss when volatility rises dramatically. At Tranquility Trading, our plan in this situation is to stick to the strategy, because we are comfortable with the back test metrics including historical drawdowns. You will need to decide for yourself whether there is a maximum loss that you are willing to endure.

Another situation that could occur with any ETF or ETN, including VIXY and SVXY, is that the issuer stops issuing new shares or takes other action that results in the ETN’s price being skewed or “unhinged” from its underlying index. This actually happened with TVIX in 2012 when Credit Suisse stopped issuing new units for awhile, causing the price of TVIX to soar. If this scenario should occur with VIXY or SVXY, our plan would be to exit any open positions in the affected security and wait for normal trading to resume, because there is no way to know in advance how things will play out.

Very few of us trade every single day that the market is open; we take vacations, move to a new home, attend to family matters, and participate in other activities that prevent us from trading. So what’s your plan when you’re going on vacation?

Our vacation plans usually go something like this. About a week before vacation starts, we stop taking new trades because those trades might not have time to play out before we leave. Meanwhile, we obey all exit signals for our existing positions, and then close any remaining positions on our last day of trading. That way we can leave for vacation with a flat account, and not have to worry about what the market’s doing while we’re trying to enjoy our time away.

Upon return, we have to decide whether to jump into any open positions shown by the system, or just wait for new entry signals. If the average hold time for the system is quite short, then we will usually just wait for new entries. However, if the hold times are measured in weeks or months, then we will enter positions for any open positions to realign ourselves with the system portfolio. Obviously there are more factors that you could consider here, like how long ago the entry signal occurred, how much the price has already moved and in which direction, etc.

Over time, you will discover other events that prevent you from perfectly executing the signals from a quantitative system, and that’s to be expected. The key is to have a set of rules in place that allow you to handle those situations consistently.

Make your plans now.

Matt & Cesar

Shadow Vega – How to place orders

We want to make sure that you profit from the trades in the way that you should.  Just because you have a good strategy, does not mean that you will execute the strategy correctly. Execution is an important part of this. Part of that is understanding how to place your orders for both entering and exiting the trades.

Overall, it is very easy. So, whether you’ve been an active trader or you’ve never really placed ETF trades before, you can do this!

Our simulated results are based on entering and exiting the ETF at the open on the first trading day following the signal’s appearance in the nightly signal table.

It does not matter what broker you use.

For Buy Orders

Place your orders by entering a buy order for the number of shares you want to buy for the opening. You can enter these orders before the market opens and at most brokers, even the night before. Most brokers will allow you to place a “Market on Open” (MOO) order which specifies that you want to complete your order as soon after the open as possible, at whatever price is current at that time. In most cases, the result will be that your order is filled at or very near to the opening price of the day.

For Sell Orders

You exit the ETF the same way that you enter, except that you place a sell order rather than a buy order.

You NEED to place both the buy orders and the sell orders at the SAME time. The reason is that the proceeds from selling one ETF will be used to buy the new ETF.

Also, you MUST have a margin account to place these orders, even though you are not borrowing any money on margin. To get out of a position and use the money for a new position on the same day, a brokerage requires a margin type account.

Other Options

Some people prefer not to enter or exit at the open. Some other options include

• Placing the orders manually shortly after the open
• Using TWAP order type
• Using another algo method that is offered by your broker

If you have any questions, please write us so that we can clear them up for you.

Thank you,

Matt & Cesar

2025 June Portfolios for Shadow Vega

THE SIGNALS ARE IN BETA TESTING

Signal Table Explanation (coming soon)

Portfolios should be published by 8:15pm Pacific Time. If the signals are not up on time or if you think there is an issue, send email to signals@TranquilityTrading.com. Please do not use this email for general support. For general support go to here.

Recent Posts

• Shadow Vega – Choosing a portfolio
• Shadow Vega: Have a plan
• Shadow Vega – How to place orders
• The News is Mayhem, the Market…not so much.
• 2025 June Portfolios for Shadow Vega

The date represents the trading day the signals are for.

June 9, 2025

June 6, 2025

June 5, 2025

June 4, 2025

June 3, 2025

June 2, 2025

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2025 May Portfolios for Shadow Vega

THE SIGNALS ARE IN BETA TESTING

Signal Table Explanation

Portfolios should be published by 8:15pm Pacific Time. If the signals are not up on time or if you think there is an issue, send email to signals@TranquilityTrading.com. Please do not use this email for general support. For general support go to here.

Recent Posts

• Shadow Vega – Choosing a portfolio
• Shadow Vega: Have a plan
• Shadow Vega – How to place orders
• The News is Mayhem, the Market…not so much.
• 2025 June Portfolios for Shadow Vega

The date represents the trading day the signals are for.

May 30, 2025

May 29, 2025

May 28, 2025

May 26, 2025

May 23, 2025