SPX calls closed

#SPXcampaign BTC $SPX Dec 31st 2165/2190 call spreads for .20. Sold for 1.25 on Dec 4th.

Well… that escalated quickly. Didn’t…

Well… that escalated quickly. Didn’t see this one coming. A move to $42 in UVXY the next 7 days would really hurt me.

SPX after hours trading

For those that don’t know, you can trade $SPX options from 3am to 9:15am ET weekday mornings, and also from 4p to 4:15p after the market closes. You may need to contact your broker to set up this ability.

What I wasn’t sure about was Monthly expiration options, which stop trading at Thursday’s close but whose settlement price is set after Friday’s open. I just confirmed you CAN trade these until 4:15pm on Thursdays (I closed a 1-lot 1975/1950 put spread that expires in the morning for .10 at 4:05pm)


$SVXY #ShortPuts – probably didn’t…

$SVXY #ShortPuts – probably didn’t need to spend the money but it was a big position
Bought to close 10 SVXY Dec 18 2015 45.0 Puts @ 0.05.
Sold these on 04/22/15 @ 2.95

SPX put spread

#SPXcampaign Since I had precisely zero put spreads, dipping a toe back in:
STO $SPX Jan 14th 1875/1850 put spreads for 1.25.

Added to STO SPX Jan4 2150/2165 1.55

Jan4 SPX 1885/1870 1.10 Now IC

The reason DUST won’t go up

I’ve been working on a Webinar for #ContangoETFs and with the discussion below on $DUST, wanted to pass along part of what I’m preparing. When you have a levered ETF, they are designed to track the DAILY move of the underlying, multiplied by 2 or 3. So if $GDX is up 1% on the day, $NUGT will be up 3% and $DUST down 3%. But then it resets next day. This creates a compound tracking error that will NOT track the underlying beyond a one-day period. In fact, it will drag both the positive & negative levered ETFs down. Here’s an example:

Let’s say the underlying and long and short 2x ETFs all start at $100. We then watch price action as the underlying swings back and forth 10%:

Day 1: underlying up 10% = 110.00
Long 2x up 20% = 120.00
Short 2x down 20% = 80.00

Day 2: underlying down 10% = 99.00
Long 2x down 20% = 96.00
Short 2x up 20% = 96.00

Day 3: underlying up 10% = 108.90
Long 2x up 20% = 115.20
Short 2x down 20% = 76.80

Day 4: underlying down 10% = 98.01
Long 2x down 20% = 92.16
Short 2x up 20% = 92.16

As you can see, with equal up and down days repeated, the underlying moves down slowly but the 2x ETFs go more quickly. Repeat this way for 6 months and both ETFs would be worth only $2.54.

So GDX has been bearish since its 2011 highs… NUGT has absolutely collapsed as a result of this compounding, but DUST has stayed relatively flat for the same reason.

Interesting, huh? That’s why these “ContangoETFs” all work… even if you don’t have the actual “contango” from futures roll, you get this compounding tracking error dragging them all down.

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