TIME FOR A BOUNCETHIS WEEK MAY BE A TOUGH ONE & I EXPECT SOME SELLING NEAR INAUGURATION. BOTTOM OF BOLL. BANDS. JUST PAID $ .40 FOR $VXX 1/27 23 CALLS. ANY MOVE CAN BE DRAMATIC LOOK AT SCALE OF CHART..OZ
ATMP trade ideas
WHAT I'M LOOKING AT FOR EARLY 2017: VIX/VIX DERIVATIVE PLAYSWith Dough transitioning over to TastyWorks (it's basically Dough on steroids), I'm looking to wind up positions I've got on here over the next several weeks so that I can transition over to TastyWorks, which will not interface with TDA accounts. While I can naturally use ThinkOrSwim (ToS), it just doesn't have the features of Dough that I've come to know and love. Call it laziness, lack of "platform fluency," or a geezerly unwillingness to change, I'm not willing to "do without my Dough."
My original intention was to wind up everything in time for the TastyWorks roll out (Jan 3rd), but I figured I would just "carry on" until TW was firmly up and running, the mad rush at the TW doors had ebbed, and the inevitable glitches or kinks had been worked out. It is, after all "a new broker," and shit can happen ... . Generally, I prefer that shit happen to someone else. Okay, call me "lazy" and selfish.
In any event, being somewhat hobbled by the unavailability of Dough IVR/IV screeners here (I have other tools to screen for those, but they're extra work), my focus is going to pretty much be solely on short volatility product plays here over the short run, with the emphasis being on VIX "Term Structure" plays and "Contango Drift" plays in VXX and SVXY (UVXY is getting awfully close to reverse split territory, and I don't want to be in the middle of an options play when that happens; they're "messy").
Unfortunately, these are some of the most boring plays out there. For "Contango Drift" plays, you're basically sitting on your hands a lot, waiting for a pop in VIX, preferably to >20, and you can be waiting literally weeks for those to occur. With "Term Structure" trades, you put them on and wait sweatily for the VIX futures price to converge on spot, ideally below your short call strike before your options expire. If they don't, you look at rolling your spreads out for duration, which means (you guessed it), additional waiting for volatility to "come in."
I'll look at posting a "Contango Drift" example here, since I've already got some "Term Structure" examples out there to look at ... .
EXAMPLE: VXX 30 DTE X/X+3 ATM SHORT CALL VERT (CONTANGO DRIFT)As previously noted in other posts, the short volatility product plays I like most are "Term Structure" plays in VIX and "Contango Drift" plays in VIX derivatives, with the preference being toward the latter play, since you're getting in on a pop in VIX and then taking advantage of "Contango Drift" in the derivatives to the downside (in UVXY, VXX; SVXY is an inverse, so you're looking to take advantage of "Inverse Contango Drift" to the upside).
Here's what I'm looking to get into a "Contango Drift" play:
1. A VIX pop to 20 or greater. For various reasons which I've elucidated before, I use the VIX price as a guide to enter these plays and not the price of the derivative itself. That being said, some traders use a 2 SD Bollinger Band as a rough guide as to when they would want to consider an entry. I really can't poo-pah that, since the last two BB touches (indicated by green arrows) would have been winners.
2. An ATM Setup That Pays at Least 1/3rd the Width of the Spread. I generally go with an ATM credit spread for which I get at least 1/3rd the width of the spread in credit (i.e., for a three-wide, I look to get 1.00 ($100) in credit per contract). This may require some "putzing" with the spread, moving it up or down in relation to current price.
3. Roll Out for Credit/Duration If Price Has Not Broken Short Call Strike by Expiry. No one likes to roll out for duration, since it usually means that the setup is "broken" and you'll be booking a realized loss in the short term if you do that. However, with contangoized setups, time/duration is on your side; the longer you hold the setup, the more likely it is that contango will work its fairly inevitable magic on it.
4. Go Small, Since "Shit Happens." Unfortunately, markets don't always "behave" the way we'd like them to. VIX can "elevate" for periods of time that are longer than we'd all like and send the derivatives into temporary periods of backwardation that aren't favorable to these setups; they'll be underwater and you'll be holding them longer than you'd like. Going small allows you to ride out periods of backwardation, as well as keep buying power free for getting into similar setups "higher up the ladder" if that sort of thing happens.
If we do get a VIX pop to greater than 20, I'll post an actual trade setup. In the mean time, hand sitting ... .
vxx updateSo lots of stuff going on, markets expected peace and quiet and a smooth transition US govt, and got this, with more to come last 20 days in office? Rocky ahead. Markets don't like the unexpected.
VXX the water is cold but ...Sometimes you just have to dive right in and suffer the chill until you get used to it.
VXX - It may be a good time to buy some protectionVXX is severely oversold. There is a good chance for a bounce in the new year as people start taking profits!
SHORT VIX DERIVATIVE PLAYS: GIVE THEM TIME TO WORK OUTAn interesting article on shorting the VIX and VIX derivatives: www.marketwatch.com
In a nutshell, backwardation occurs (which only applies to VIX derivatives, not to the VIX itself) and this can "derail" a short VIX derivative play that is not given enough time to play out and for contango to kick in and start its inevitable erosion of the underlying, whether it be VXX, UVXY, XIV (inverse), or SVXY (inverse).
And although this only shows contango/backwardation for the years 2007-2012, one theme is evident and that is that the market is in contango the vast majority of the time (on average, >75% of the time): www.cboeoptionshub.com
In essence, then, the caveat to shorting VIX derivatives in reliance on contango being a constant on top of VIX mean reversion really should be a caveat against shorting and assuming that it will work out "immediately" or even "fairly quickly" (relative terms, I know).
The practical crux of this is that if you short VXX* during a VIX >20 spike with, for example, a short call vertical, and it doesn't break your short call as you approach expiry, well, roll it out for duration to a later expiry and give it more time to work out. After all, history says that for >75% of the time, contango will be on your side, even if you have to wait a little longer than you'd like for it to have the desired effect ... .
* -- Alternative plays would be to short UVXY with a short call vert, long SVXY with a long put vert (it's an inverse), or go long XIV (it's not optionable; you'll just be stuck with stock). With XIV, since you'll be holding long stock, you're only option is to "wait it out."
Long VXX @ 32.54 - looking for triple digit price My prediction is originated from election and rate hike in december. In my opinion, there is huge uncertainty and fear on the market
BUYing fear,
SeLLing stocks and shares
potential triple digit profit on VIXX
SPY target 185.00
TRADE IDEA: VXX DEC 16TH 37/40 SHORT CALL VERTICALA short volatility trade here on the notion that VIX reverts to its mean in fairly short order post-election ... .
Metrics:
Probability of Profit: 57%
Max Profit: $105/contract
Max Loss/Buying Power Effect: $195/contract
Break Even: 38.05
Notes: This, in all likelihood, will require adjustment at open so that the break even is at or near current price. Look to set it up with the break even at current price and so that you obtain at least one-third the width of the spread in credit (in this case, $100 or more). Look to manage at 50% max profit.
VXX - VXX and 20MA!This is the most profitable trade of the year!
Anytime it hits 20MA, you could have safely short it!
VXX - VXX and 20MA!In almost every instance that VXX closed above 20 MA, market sold off and VXX had ~20% gain.
Success probability of the trade is really high.
Having said that, today's market price action was not in favor of this trade!
VXX ready to head north?In my best possible scenario-- average buy price for smart money +33=35.5 -safe range
-- nearly 15 days consolidation since 9/22, and the chart still on support
seems like this is a story planned ahead of time
VXX - They are trying to save the market!Market is weak, damaged and ready to get whacked in a big way!
DB is in trouble and they are throwing anything to stop the crash before election day!
Watch close above $36 on VXX for nice trade!
VXX - Short at neck line!No matter what FED does, VIX get hammered after FED minutes!
VXX is closing below 20MA on daily and turn weak!
VXX - Ready to POP!VXX has closed above 20MA!
In the past, it shows a volatile period for the market!
Re-test of 20MA is long entry on this!
VXX breakout from curving downtrendIn July 2015 VXX broke out of a curving downtrend for a great return in about a week.
Now this past week it is continuing to replicate the same pattern held in 2015.
My thoughts are that it will drop to $12.80 and then spike to a possible $26.00 if it follows the downtrend drawn.
vxx seriously?? Amazing the power of politics and greed, over common sense. The only thing about common sense is it is not so common. To destroy an economic system because of it, a tragedy. So perma bulls might as well make money if it is going to happen anyway, right? If you trade, is there a moral obligation to society in general to pay attention to, or not? We, they, are so far beyond where they thought they would have to go to try to ease the pain of 2008. Traditional, historic, tried and true solutions don't work once you have abandoned the model. They keep adding more and more to the kiddy with the same tricks that they know are NOT WORKING. Kicking the mother of all cans down the road that dead ends, and I see the end of the pavement now. Only dirt roads beyond. The ONLY SOLUTION(s) will be found in the new model, now being formed. IMO, the 1% are just holding this thing together, making sure of no large drops in the market because they really have no choice, with toothpicks and straw, until Hillary and Bill are in. OM gosh, what if Trump actually wins? Media loves it because they can sell more ads while people watch this reality tv show. The new system is coming, and soon, because it has to, we will have no choice. What a way to justify the change of the millenium. Buying this dip soon, but when? If there is a vxx left to buy then.
VXX - Another try to close above 20MA!VXX tried several times this year to close above 20MA and failed every time except "1" time.
Short target is "$30.20" which is ~20% lower.
