VRP 350 AI

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Subscription

When you subscribe to strategies you will receive Trade Signals that give you the information to properly execute the trade entries and when trade exits are required, you will also receive an exit signal as well.

The subscription price you see is for the interval (monthly,yearly etc...) chosen as a flat fee. We DO NOT charge per contract fees or fees for profits. You pay a single subscription fee and trade how you like with as many contracts as you like.

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$138

3.54%

Hypothetical YTD return of $3,900

as of 02/03/2023

*Note that we DO NOT reinvest profits when calculating performance

Core Strategy

Instruments

Ticker
SPX
Options Chain
SPX
Root Ticker
SPXW

Watch Performance

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Description

VRP 350 AI is one of Moneza's core trading strategies. It is a VRP SKEW extraction strategy that trades only in SPX weekly options. VRP 350 AI uses artificial intelligence to predict and produce advantages by identifying volatility patterns and learning from recent history. The artificial intelligence powering VRP 350 AI is trained every 3 to 6 months and uses the most recent 3-month history to evaluate and optimize performance. This strategy is unique in the market as we use data analytics to predict volatility instead of predicting the directional nature of the stock market itself.

Objective

Leverage proprietary deep learning algorithms to assess the bullish or bearish-ness of the most mispriced trades and optimize for maximum edge

Funds and Holding

Cost per contract
$250
Minimum investment required per contract
$3,900
Maximum drawdown per contract
$2,000 (51.28%)
Holding time per contract
3 Days

Information

These are binary trades that trade 3 times per week, in which each individual trade can double or lose its entire contract amount. There are no stops in between

Performance

Units in Thousands USD

Units in Thousands USD

Duration VRP 350 AI SPX
2017 - 2023 YTD 464% 81%
TTM 70% -10%

The performance data shown represent past performance, which is not a guarantee of future results. Returns and principal value will fluctuate so that positions, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited.

Technology

What is VRP?

The Variance Risk Premium (VRP) is the premium in price paid by market participants to hedge against variations in future realized volatilities. In other words, it’s the price paid by participants to gauge market sentiment about uncertainty.

It is the difference between future variance (implied by the option price) and the actual variance realized overtime. And while this is a valuable tool to appraise the uncertainty about future variations in stock returns (including during extreme events), this is often mispriced as it does not always take into proper consideration every critical factor involved in decisions made by participants. As a result, we can design strategies to take advantage of these opportunities.

Monetizing the VRP

In essence, a money-making strategy just needs to sell the implied 30-day variance of the SPX while buying the SPX realized for the same period collecting the difference. If only we could find an instrument to do this...

Why the SPX and not the SPY?

Option To Expire

SPX is a European Style Option vs SPY being an American Style Option. This means that SPX is cash-settled at the expiration date, so it cannot be exercised prior to expiration as SPY can. Trading on SPX options will save you from all closing commission costs as you will not need to close your position. Instead, you can let your options expire into cash if you win the binary trade.

Larger Contract Size

SPX contracts are 10x larger than SPY contracts which can lead to lower commission costs depending on how your commissions are charged.

Better Tax Benefits

Lastly, there are major differences in tax treatment between the two option types. Many investors believe SPX options offer tax advantages due to how the IRS treats SPY options versus SPX options.
  • Investors are usually allowed 60% of the profits from trade when using SPX options- treated as long-term capital gains, no matter how long you held them even if it’s for 1 day. SPX options receive these advantages because the IRS gives SPX options special treatment (Section 1256).
  • We caution that although the SPX can seem like the better option from a tax standpoint, the tax implications in their treatment may not be significant enough to guarantee an advantage. Please be sure to check with your CPA as we do not provide tax advice and tax rules can and do change.

Exploiting Market Inefficiencies

Structural Inefficiences
The world today operates in a computer-based financial market which uses stochastic mathematical models.
Sources of Inefficiences
Transactions within markets are coordinated by market makers who care most about the spread between the bidding and asking prices and much less so about the exact price itself. This results in frequent mispricing.
With SPX options, price volatility is left largely unchecked by the biggest participants (institutions) who trade these options only to hedge for regulatory concerns. Additionally, the observable tendency of option-dealers is to overprice puts vs. calls. This creates mispricing opportunities for us to capitalize upon.
VRP Mispricing Creates Edge
As options dealers hedge their positions to eliminate directional risk, they create an exchange of risk (directional vs. variance) and as option prices depend mostly on the expected variance of the underlying asset, this results in observable and persistent overpricing of variance in the option (e.g., the SPX). Therefore, our strategies are focused on collecting the variance risk premium

How it works for VRP 350 AI Strategy

Moneza uses deep learning - Convolutional Neural Networks (CNNs), Deep Reinforcement Learning (DRL) and Long Short-Term Memory Networks (LSTM) to increase its edge by predicting standard deviation and mean of closing SPX prices in 1- and 5-day sessions. The same principles can be applied to raw market data to determine whether to buy or sell binary spreads.

Convolutional Neural Networks (CNN)

Convolutional Neural Networks (CNN) are series of algorithms that work to identify underlying relationships in complex datasets. In other words, it’s a computerized method to mimic the functionality of the human brain. In our case, this is used to analyze market movements.

Deep Reinforcement Learning (DRL)

Deep Reinforcement Learning (DRL) essentially helps these algorithms learn how to achieve complex objectives.

Long Short-Term Memory Networks (LSTM)

Long Short-Term Memory Networks then helps by allowing previously viewed information to persist. This is like watching a movie while remembering what transpired in the previous scene or reading a book while knowing what happened in the previous chapter.

Together, our technology leverages these systems to analyze the market and extract key insights needed to execute our strategy. In doing so, we developed Ultra, a family of proprietary convolutional nets which we use to extract variance risk premiums more efficiently with increased win rates while reducing maximum drawdowns.

Recent Trade

as of 01/31/2023

Recent trades are for informational purposes and show the most recent closed trade a subscriber to VRP 350 AI would have executed by subscribing to this strategy and allowing Maika to execute in your broker account.

Jan30 4025/4020 Bear Put

Action
BUY
Open
01/25/2023
Close
01/31/2023
Average Price
$255

$245

Profit

+96%

ROM

Jan27 4035/4030 Bear Put

Action
BUY
Open
01/24/2023
Close
01/28/2023
Average Price
$255

$-255

Profit

-99%

ROM

Jan26 4025/4020 Bear Put

Action
BUY
Open
01/23/2023
Close
01/27/2023
Average Price
$255

$-255

Profit

-99%

ROM

Jan25 3975/3970 Bull Call

Action
BUY
Open
01/20/2023
Close
01/26/2023
Average Price
$260

$239

Profit

+92%

ROM

Jan24 3910/3905 Bull Call

Action
BUY
Open
01/19/2023
Close
01/25/2023
Average Price
$260

$240

Profit

+92%

ROM

Jan23 3935/3930 Bear Put

Action
BUY
Open
01/18/2023
Close
01/24/2023
Average Price
$250

$-250

Profit

-100%

ROM

Jan20 4000/3995 Bear Put

Action
BUY
Open
01/17/2023
Close
01/21/2023
Average Price
$250

$250

Profit

+100%

ROM

Jan19 4005/4000 Bear Put

Action
BUY
Open
01/13/2023
Close
01/20/2023
Average Price
$250

$250

Profit

+100%

ROM

Jan18 3990/3985 Bear Put

Action
BUY
Open
01/12/2023
Close
01/19/2023
Average Price
$250

$250

Profit

+99%

ROM

Jan17 3980/3975 Bear Put

Action
BUY
Open
01/11/2023
Close
01/18/2023
Average Price
$250

$-250

Profit

-100%

ROM