If you take $100 and have it go up 10% and then take that new number and have it go down 10%, and repeat that up-and-down cycle four times, you’ll end up with approximately $96.06. In other words, choppy movement will deteriorate the price of an asset over time. Thus, all other factors being equal, it’s better to short an asset with choppy price…[Read more]

Thank goodness I was all in cash today (I was editing videos and coaching clients; staying busy saved me!). Seems like ages since we’ve had a -2% day in the markets. I feel that the “more attractive” (i.e., almost keeping up with the rate of inflation) bond yields will not beget market volatility for much longer, since the equities markets are…[Read more]

Basically what Seth said: Beta slippage may only be a minor factor in a brief scalp trade, but it is a factor nonetheless and would favor shorting VXX over buying SVXY; and again, a disadvantage of shorting VXX is the “undefined” risk involved (unless you find a way to hedge the trade).

Thank you ereitzel, selling UVXY is a way of life for me… or at least a decent living

10-year Treasurys (weird plural spelling but evidently that’s how it’s spelled: https://www.cnbc.com/id/32462271) currently yield 2.785%. Everybody knows that it will reach 3% eventually, so that fact by itself shouldn’t be sufficient to tank the market. It’s…[Read more]

Steve, I generally go out 45 days til expiration when selling options, and 3 to 6 months out when buying options. I am never, ever sure of hitting a home run, so selling an OTM put softens the blow when I’m wrong.

Precisely — no predicting, just trade what I see

If there’s one thing the market doesn’t like, it’s the unknown. As this week passes, the unknown will become more known and I believe there will be some relief.

I’ll choose Golden over Goldman any day. Sorry, had to say it

Hello Steve, yes indeed, vertical means that the expiration dates would be the same, and the only difference between the bought option and the sold option would be the strike prices. As an example, with VXX closing at 29.65 today, someone could have, a few minutes prior to the closing bell, bought a 32-strike put (which would be in-the-money) and…[Read more]

Richard, I have to admit that I don’t trust IB, given what I’ve been hearing about their margin-related practices.

Germantrader, I understand your anxiety. Tomorrow is another day and we’ll see what happens. I have a funny feeling that UVXY won’t be able to rocket upwards for much longer.

With a $10,000 USD account, I wouldn’t short shares of UVXY. Instead, I would buy vertical debit put spreads (buy ITM and sell OTM, between 3 and 6 months til expiration) on VXX when it spikes, then sell them when VXX almost inevitably falls. Perhaps I would buy $1,000 worth of VXX put spreads on a moderate vol spike, or $2,000 worth of them on a…[Read more]

UVXY and VXX are just doing their own thing at the moment, completely ignoring spot VIX and the current price action of the S&P 500. It’s frustrating, but not much can be done about it…

Thank you Ricardo, and I believe that you will do well with your short core position

I have made an introductory video on VWAP basics and there are folks who swear by the power of this indicator. I would suggest only using it along with other metrics such as contango, roll yield, etc., when trading vol products.

I agree with you, Richard. Piper Jaffray choosing 20% as the number for a correction is an arbitrary choice and the market has no particular reason to abide by this number.

Now it’s day 2 of the government shutdown… Will we get some real volatility on Monday?

I’m also ready to short volatility if a shutdown occurs and a volatility spike ensues. Textbook example of a temporary problem that will get cleared up, as opposed to an actual problem with the economy.

Binyamin, I haven’t considered the idea of buying protective UVXY calls ahead of time, during low volatility, for a future short UVXY position when volatility spikes. That’s a really interesting strategy.

Retiredmarine1214, I completely agree with you: Mixing personal political beliefs into one’s trading is hardly a recipe for success.