VXX Bearish inclined Naked Calls 1 Apr Expiry (Apr Track 1)
Updated
Whats The Plan/Trade/Thought
- I purposely ended my March trades last week because I felt this week would be super volatile given the Fed announcements on interest rates. This play turned out well as I got to write VXX calls that end 1 Apr at an amazing price
- On the 15 March, I noticed that the VXX had stopped correlating with the market and I believe this had to do Barclay suspending new share creations of their VIX Short Term futures ETN (VXX). In a statement, the bank said it ran out of issuance capacity for the two products and would halt new creations indefinitely. It claimed the halts were not a result of the war in Ukraine
- This divergence, allowed me to quickly write VXX Call options that expires 1 April at $3 a contract. I decided to use a smaller Margin (50k) because it is still a VUCA global situation and I wanted to have room to maneuver. I have also never seen the VXX diverge so drastically before.
- I also believed that the Fed’s announcement would already be factored in to the past weeks and current volatility
I Feel - Pretty damn good, the VXX as aligned back to the market and right now the market is pretty bullish. Lengthen my distance to strike.
Imagine Yourself Taking The Other Side - This trade is very opportunistic in timing and volatility. There is no way I would take the other side given the price movement.
Imagine Yourself As A Neutral Observer - The risk of this was the unknown of why the VXX was diverging from it’s original intention and what the implications where.
Look For New Information - I did a search to understand what was going on with the VXX, but I decided that it was better to look and based my decision on the current sentiment of the market.
How Do I Feel Now - I am very very happy with this play as it mitigated risk by having a shorter time frame, high contract price and also leveraged my understanding and tracking of the market’s key events.
Trade Specs - Sold 60 Calls @ 3.00 - Strike 58
- % to Strike 41%
- ATR 98%
- BP used 51k
- Max Gain: 18k
Trade active
I added on 250 written calls to this trade that uses the same $58 strike but ends one week later on the 8 Apr. BP used was USD 63k and est gain is USD 10,750. I wanted to find another counter but at the present moment I did not see any good opportunities and so I decided that a Broad Market bet with a near term expiry was safer.Trade active
I added 170 written calls to this trade that ends 1 Apr. BP used was 69k and est gain is USD 7140. The VXX spiked in the US am and I took advantage of the price spike with a 4 day expiry to limit risk.
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