MSR US Equities – Reversal, TV15 Index
Strategic Reversal Indices simulate trading a relatively simple counter-trend model in a futures contract or group of futures contracts. The model uses the widely known Black-Scholes option pricing model which builds a position opposite daily market movements based on the gamma statistic of Black-Scholes. The number of contracts that the index “owns” is determined by an algorithm based on the volatility exhibited by that futures market’s (or markets’) reversal positions over the previous six months. Annualized volatility is calculated by multiplying the standard deviation of daily returns by the square root of 252 (the estimated number of trading days in a year). This index simulates trading of a US Equity portfolio of equity index futures contracts from the U.S. comprised of the S&P 500, Dow Jones Industrial, and NASDAQ-100. The entire index targets an annualized volatility of 15%.