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VXX

BOUGHT VXX SEPT 16TH 13/MAY 13TH 18 SHORT CALL DIAGONALLayering on another long volatility setup here on this dip below 17.50 in VXX. (See Post below as to how to work this "poor man's covered call"). Unfortunately, there are virtually no metrics to provide with a diagonal, such as probability of profit, since it will vary depending on how much credit you collect during the life of the setup, when and how much VXX pops during its "lifetime", and when you chose to take your money and run ... . The one metric that can be provided is the fact that this setup cost $413/contract to put on, which is the extent of your loss if you allow your long call to expire worthless in September (in which case VXX would have to be below 13 at expiration). Naturally, I intend to bail long before that ... .
CBOE:VXXLong
by NaughtyPines
PREMIUM SELLNG: NEXT WEEK REMAINS A "WASTELAND"Another week of wasteland for premium selling, with EWZ again topping the volatility charts for non earnings plays, although I may go small with an IWM setup in the May monthly (it's the most volatile amongst the index ETF's, which ain't saying much). I've got one more short-term RUT/IUX setup on that I will need to address, but other than that, it's going to be a light week trading wise from where I'm sitting right now. Although you can naturally dip your toe into some of the more volatile individual underlyings pre earnings, my preference is to keep powder dry until the actual announcement is upon us before diving in, and there simply isn't anything on next week's earnings calendar that meets my standards for "options playability." So, in the absence of some monumental sea change here, I'm going to be mostly hand sitting for the week on options plays, but may dabble with scalping /ES intraday and/or look for another opportunity to go long volatility in a VIX derivative, assuming we get to around VIX 13-ish.
AMEX:EWZ
by NaughtyPines
2
LOOK FOR VIX SUB-13 TO REENTER LONG IN VXX/UVXY OR SHORT SVXYHaving exited a VXX short call diagonal setup today, I'm looking at further opportunities to get back into a long VXX or long UVXY setup, and -- as previously noted, I'll be looking to VIX for guidance, since both VXX and UVXY suffer from contango and their "bottoms" are slippery slopes that are gradually eroded by contango over time. In other words, what's a "bottom" now in VXX and UVXY may not be the "bottom" next week or next month or the month thereafter if we have prolonged low volatility. You can naturally also short SVXY on a VIX sub-13 level, since it's an inverse ... . In its case, its top is the slippery slope.
CBOE:VIXLong
by NaughtyPines
COVERING VXX SEPT 16TH 13/MAY 6TH 17.5 SHORT CALL DIAGONALI put this on on April 1st, thinking it might be a while before I could take it off, but covered it today on this pop, freeing up the buying power for another go should be strike $17 again. I put it on for $373/contract, and took it off today for a $419 credit, yielding a $42.93/contract profit in six days. Naturally, this isn't hugely earth shattering profit-wise, it's always best to take off a VXX setup of this type as soon as possible. The contango helps your short call in the long run, but also eats away at the value of your long over time ... .
CBOE:VXXLong
by NaughtyPines
WHAT I'M LOOKING AT NEXT WEEK: MON, EWZ, VIX PRODUCTS, FXEWith VIX at sub-14 levels and without much on the earnings calendar that is ideally playable with options from a premium selling standpoint, next week is likely to be a schnooze in the absence of a broad market volatility pop. Nevertheless, there are a couple of plays I might consider. MON: MON announces earnings on April 6th before market open. With an implied volatility rank of 58 and implied volatility of 32, it's not looking all that sexy for premium selling at the moment, with the preferred rank/IV metrics being >70 and >50, respectively. Nevertheless, the run-of-the-mill short strangle is offering up more than 1.00 credit ($100)/contract in premium at the moment, so it might be a worthwhile play (April 15th 81.5/94 short strangle). EWZ: The Brazil ETF still has a bit of "kick" in it, with implied volatility rank at 72 and implied volatility at 58. For lack of premium selling elsewhere and to offset in part a tested iron fly setup I have on (see Post below), I've dispersed risk by laddering setups in this underlying (short strangles/iron condors) through several expiries, which doesn't tie up much buying power given the price of the underlying. VIX/VXX: With VIX at these levels, I'm considering loading additional long positions here, although I don't want to go all crazy large at once. My setup of choice has been VXX long-dated diagonals/synthetic longs/poor man's covered calls with the back month long option in the September expiry, which allows me plenty of time to be right without having to leg into and out of, for example, short put verticals repeatedly. This also allows me to "swim with the tide" with the short call, since we're in contango here, which exerts a downward pressure on price (although this also affects the value of the long-dated option in the short term). (See VXX Posts, below). As a side note, I'm avoiding plays in leveraged products like UVXY and SVXY due to pending SEC regulations that may affect these instruments. Although these regs are mainly focused on 2x and 3x leveraged products, I don't want to be in any leveraged product with a long-term setup whose liquidity and/or viability might be affected by implementation of the regs. FXE: With the Euro hovering slightly below my sell area (1.14), I'm looking at getting into the Euro proxy FXE with a short play of some kind going forward. However, it may pay to be patient here, since we've have had "dovish gruntings" from the Fed which may put a damper on Greenback strength for a bit of time, as well as some modestly positive ECB data. As compared to spot, I could still potentially pull the trigger on a short FXE setup of some kind here, steering well clear of recent strength areas (e.g., 8/24 "risk off" spike to 114.81 or the Fib line at 116-ish).
AMEX:FXE
by NaughtyPines
MARKET PERSPECTIVE: BROAD MARKET UPTURN "UNREMARKABLE"Suffice it to say, the duration of the broader market rally from mid-February to the present has caught a large number of traders by surprise, a number of whom have repeatedly attempted to call tops or turning points that would see a major sell-off of some kind and have rued the continuation of the upward trend that has yet to meaningfully break lower. Call this upturn what you want: "irrational," "non-fundamental," "poorly structured" and posit whatever reason you like for it: petro speculation, risk off/risk off, short squeeze, comparative dovish/hawkishness of various Central Banks, algos, the Plunge Protection Team ... . I frequently say that, as a premium seller, "I don't care about market direction; I care about volatility", since volatility drives premium, and low volatility is not the friend of a premium seller. However, a more nuanced, accurate statement would be that "I care about volatility level for entry, and the degree to which the underlying moves thereafter. " So that fact that we've experienced an oversized move here is not lost upon me ... . But the fact is, if you look at the market from a volatility perspective, the upmove is not particularly unprecedented and, in the broader scheme of things, not all that lengthy in duration ... yet. I've examined the length of time the VIX spends in troughs between peaks of at least VIX >20. It's rather unscientific, but I think you'll get the drift of the thing, which is that the market spends substantial periods of time in troughs between VIX >20 peaks: they've been periods as short as 60 odd days and as long as 250 plus days with the average being about 140 or so days between >20 peaks over the previous 7 "peak to trough" periods. Naturally, some of the sustained low vol occurred during QE, so it's questionable whether we're going to have to wait another 120 odd days before another >20 vol spike and/or market downturn (the last >20 candle was the 2/29 weekly a month ago), particularly with further Fed tightening on the horizon.
CBOE:VIXLong
by NaughtyPines
ROLLING: VXX MAY 6TH 21 SHORT CALL TO MAY 20TH 21 SHORT CALLI'm rolling the May 6th 21 short call of this setup to the May 20th 21 short call for an additional $23 credit, as the May 6th had lost a good deal of its value ... . The long-dated option leg of the setup cost a $752 debit when I put it on, and I've collected a net of $229 in credits so far -- about 30% the value of the long option. Naturally, as price moves toward the long option, its value decreases, so the entire setup as of right now is "in the red" ... .
CBOE:VXX
by NaughtyPines
BUYING TO CLOSE VXX MAY 20TH 20 SHORT CALLI didn't like how far out in time I rolled my short call, so I closed it out, opting to sell something closer in time. So I closed out the VXX May 20th short call and sold the May 6th 21 short call instead for a credit of .92 ($92). I'll attempt to be a touch more patient with the roll this time and wait until a few days prior to expiration or until there is little or no extrinsic value left in it. I originally received a 1.59 credit for the April 15th 21 short call and .77 for the roll to the May 20th 20 short, for a total of 2.36 in credits ($236). I closed out the May 20th 20 short call today for a 1.49 debit, so I realized a profit of 2.36 - 1.49 = .89 ($89)/contract in profit. That being said, what I'm looking to do here is to roll the short call over time, collect credit for doing so, and get to a point where the sum of the credits collected + the current value of the long-dated call exceeds what I paid to put on the setup in the first place. Naturally, price's caving here helps out the value of the short call (it decreases, which is what you want), but it also decreases the value of the long call. As with an ordinary covered call where you take a position by buying shares of stock and sell calls against to reduce cost basis in those shares, you generally want price to either remain stable or pop. I'm naturally looking for volatility to pop between now and the expiration of the September long to bail on the set up as a unit ... .
CBOE:VXX
by NaughtyPines
S&P forecast 2016From what i have learned and observed, i see a bear market developing. Global financial infrastructure is based on debts and at unprecedented levels which are unsustainable. A complete reset is needed and will be coming in the future. All economic data in the U.S. is manipulated, true unemplyment sitting at 15/17%. 1% gbp rate. Low interest rates and still low demand for loans, it's clear to me, people have little money and lots of debts...the writing is always on the wall...just need to think and pay attention, draw your own coclusions to get the "truth"...;)
FX:SPX500Short
by cris_72
LOOK TO VIX LEVELS TO PLAY VXX, UVXY LONGOne of the other things I'm watching next week (and, in fact, that I look at daily) is the VIX. With VIX at 14.02, a sub-12 "fearlessness level" is within striking distance, so I'm looking to add to my long volatility position in here somewhere, assuming the price is right. The VIX bottom is not particularly "clean," but historically the low volatility periods are marked by a low range between 14 and 11. When going long volatility, you're naturally not limited to going long VIX. You can also go long VXX, long UVXY, or short SVXY (an inverse). But when you compare and contrast the charts of VIX, VXX, and UVXY, something appears markedly "goofy" with the VXX and UVXY charts. That "goofiness" arises from cycles of backwardation and contango (mostly contango) and, as a result, the VXX and UVXY "bottoms" are somewhat fuzzier and more ill-defined than those of the pure fear index, the VIX. Because of this "bottom fuzziness" in VXX and UVXY due to contango/backwardation, I use the VIX as my bottom guide if, for some reason, I'm not going to play VIX options to go long volatility, but opt to go long in VXX or UVXY instead (my general preference is to use VXX over UVXY if I'm not using VIX options; UVXY bid/ask spreads can frequently be grotesquely wide, making it difficult to get a fill at a "fair" price). When the VIX reaches the price I'm looking for, I then turn to the VIX derivative product and look at setups for taking advantage of VIX bottoming, such as a short put credit spread or a synthetic covered call. So, you might be asking, "Why don't I short SVXY using options?" SVXY is an inverse volatility product, which means as VIX increases, SVXY declines and vice versa. Unfortunately, these volatility products have their own volatility. As SVXY declines, its volatility increases, so you may find your short call setup treading water as SVXY declines because, as it does so, its volatility increases, which affects the price of its options. Moreover, SVXY -- as an inverse VIX derivative -- suffers from "inverse contango", which means that, generally, over time, its price will increase to infinity, assuming that "contango" is a constant push on its price. You'll notice that SVXY has had to reverse split a couple of times to accommodate this "inverse contango". Consequently, it's just more effective to go long volatility in the long volatility products, VIX, VXX, or UVXY.
CBOE:VIX
by NaughtyPines
WHAT I'M LOOKING AT FOR THIS COMING WEEKWith the VIX at sub-15 levels, premium selling plays are hard to come by, so I can either resort to low volatility strategies (calendars, diagonals), look to go "long volatility," or search for "diamonds in the ruff" for premium selling. Since I not a rabid low vol strategy player, I'm going to look at seeking out what limited short volatility plays there are or go long volatility, assuming an ideal setup presents itself. Currently, the sole individual underlying that I would sell premium in and that is not an earnings play is EWZ, since it still has an implied volatility rank of +70. Naturally, there are other underlyings with +70 implied vol rank, but they're just too low in price to get significant premium out of (e.g., PBR, which has a rank of 84). Unfortunately, I already have a play on in EWZ and don't like doubling up on plays just because there's nothing else out there. However, there are a couple of earnings announcements that are giving me that "come hither" look: NKE, which announces on Tuesday after market close and GME, which announces on Thursday after market. They're not looking especially great right now (each bringing in about a .70 ($70) credit for the 70% probability of profit short strangle setup (I generally like to see a 1.00 ($100) credit out of these), but they're worth keeping an eye on in the event that they get "frisky" right before earnings. The other thing I have my eyes peeled for is further weakness in the VIX with my "dream" price somewhere around 12. See my VIX post for what I'm looking at to play either VIX, VXX, or UVXY long ... .
NYSE:NKE
by NaughtyPines