Tuesday, February 8, 2011

VXX: Closing Out Naked Calls

On Monday 1/31 I was waiting to see how the markets opened and how they reacted to the weekend news in Egypt that riled the markets the previous Friday. If there was no initial follow through of fear then I was prepared to short the VXX via short calls. I picked a pretty far OTM strike in case I was wrong and gave myself some room. I sold to open the $40 strike calls at .42 and closed out today for .03. I captured 93% of the profit in 8 days so I decided the risk/reward of holding another 11 days for .03 made no sense. On to the next trade. It's a relatively small pick up with a net of $382 after commish, but risk was relatively low as well.

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