VXX Bearish inclined Naked Calls 11 Feb Expiry (Feb Track 1)
Updated
Whats The Plan/Trade/Thought
- Market seems to be ranging with deeper drops. This VXX trade is positioned as a hedge as it takes a bullish market stance. I like this structure of having a broad market hedge and especially a position that expires early in the month. As I would still have a solid feel of the previous month’s sentiment.
- VXX seems like a good trade for early month as the BP drops drastically as it gets closer to expiry. If price goes against you, the expiring previous month’s trade will release BP to support it.
- VXX contracts sometimes also have good premium as it spikes more during volatility events
- For Feb’s VXX entry I will wait until 12 Jan after Jerome Powell’s speech. As that could spike the premiums and provide more visibility on the market direction.
I Feel - I feel confident on the trade and especially how it fits into the entire trade structure. Taking advantage of the entry and exit timings and the nature of VXX and it’s BP behaviour (It reduces drastically in size, closer to expiry).
Imagine Yourself Taking The Other Side - VXX is also good as it is a market wide counter. Only worry is that it is exposed to the volatility of tech
- The Omicron news on the 26 Nov drove the price up by 47% to $30, while it did fall after 6 days. The recency and the potential for VXX to increase in a Black Swan event is also a potential and the BP requirements to maintain would be extremely large
Imagine Yourself As A Neutral Observer - I don’t expect another super volatile Black Swan event happening in the next month. Especially since knowledge on Omicron and the Fed’s inflation mitigation actions are clearer. But the market movements from Omicron in Dec really scared me and I need to see how I can better shield myself
- Price is steady downtrending
Look For New Information - While Omicron has mild symptoms, the high infection rates are hitting businesses even harder because there is a direct impact on labour which are the legs for most businesses. I wondering how this will impact Q1 earnings
How Do I Feel Now - I feel confident and worry free
Trade Specs - Sold 123 Calls @ 0.63 - Strike 29
- % to Strike 62%
- ATR % is 67%
- BP used is 89k
- Max Gain: 7749
Trade closed: target reached
Yay!
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