We have a jobs number out on Friday which may humble the bulls again. As I have mentioned I am leaned bullish for this week and maybe next. But this tendency depends on Friday's jobs number and how long it takes us to get to 1100 on the /ES as I think this will be the home of the next lower high before we make a move to test the July lows of 1002.75.
I highly anticipate a follow through up day tomorrow and if we get close enough I may try to get long the VXX before Fridays Jobs number if it looks attractive. I am leaning towards doing a risk/reversal by way of selling the ATM put and ATM call, where ever it is at time of execution. I expect that the VXX will be near 20 or maybe below, currently at 20.68 as I write.
I will keep you posted!
I am interested in selling OTM puts rather than get long if we touch or break 20 on VXX. Strike price to be determined later.
ReplyDeleteI actually just took a look and I like the OCT19 VXX puts at .80. That's a (.80/18.20) 4.4% return for 6 weeks and two days on something that can't possibly go to zero. That's 34%% a year if you could consistently get 4.4% on your money every six weeks 32 trading days. This is also a good counter income trade to my current short OTM puts. They can't both lose. If Vol falls off the map then my OTM puts expire worthless, and I have no problem only VXX at a cost average of 18.20 and either holding as insurance to get long, or writing covered calls to get back to break even.
ReplyDeleteOk, I am pulling the trigger. When I first looked at this trade I was looking at buying a synthetic or risk reversal by way of selling a put and buying a call. I was looking at selling the Sep $20 put and buying the $21 call for a credit of $0.15.
ReplyDeleteBut then I looked at selling the $21 put which is slightly ITM and I think it should accomplish about the same profit as the risk reversal at one less commission. I sold it for $1.40 and am looking for a 5% in Vol which should allow me to buy it back for half that value.
Otherwise it sets me up with a breakeven of 19.65. Which as it stands right now I am comfortable with.
I like this, if you end up close to even or slightly negative near expiration the prices are attractive to roll out and maybe even out and down a strike. I did end up selling the OCT19 for .80 yesterday. Maybe a little impatient doing all 10 yesterday instead of 5 to start, it's .90 bid right now. I'm comfortable owning VOL through October, and at a cost average of 18.20 there isn't an exit strategy.
ReplyDeleteOn todays upmove in equities and downmove in Vol, I sold 1 more Sep put at the $18 strike for a quarter.
ReplyDeleteThis morning we are getting a 8% pop in volatility, yet the VXX is only popping 1.15%. I am closing this trade out as I just don't like how disconected the two really are.
ReplyDeleteTaking about a $70 loss on the trade.
This kind of goes back to my origonal thought on this product, it is really a decaying asset. I think it may make more sense to short this product and buy calls for protection. It will mostly likely end up like FAZ and FAS, where they had to do a 20 to 1 Reverse split.
ReplyDeleteYeah I've been reading Adam Warner's daily rants about this instrument. Now that I'm long via short put exposure I've been following every day and not liking what I see. I still like the premiums you can get, but doesn't make sense to hold long unless they can do a better job of tracking. I need to learn how the VIX futures work.
ReplyDelete