Jeff 7:05 am on Thursday, February 11, 2016
Tags: VXXGame ( 769 )

UVXY short-term

#VXXGame This is a trade that has been working for 5 weeks straight. On Thursday or Friday, use any spikes in $UVXY to sell calls expiring the following Friday (7 to 8 days DTE) about 25-30 points above current price. Then continue to add more on Monday or Tuesday if there are more spikes. I have this week’s 70 calls that should expire tomorrow, sold between .50 and 1.10. I usually end up with 7-10 contracts around .70-.80 avg price, so a nice $500-$800 gain each week. There will likely be a week where we get a much bigger volatility spike, and this trade will have to be rolled or closed with a loss. But as long as VIX remains orderly, this is working. This morning…

Sold to Open UVXY Feb 19th 85 calls for 1.07. I missed the highs but will sell more if we go higher, or move to a lower strike if UVXY drops.

Jeff 7:10 am on Thursday, February 11, 2016

I’ve had a lot of questions from newbies about #VXXGame. You must know your account’s limitations and how your margin will be affected if UVXY flies high quickly. But I think selling one or two contracts like I have shown above is a good way to test the waters. It can also be sold as a spread, I would suggest 10-points wide. The Feb 19th 85-95 bear call spread could have probably been done for about .50-.60 this morning (about .40 now).
fuzzballl 7:11 am on Thursday, February 11, 2016

Very nice! Don’t forget puts on any little weakness…talk about a margin free money maker…wow. Glad I even rolled some up yesterday.
🙂 🙂
sasquatchonline 7:33 am on Thursday, February 11, 2016

Thanks, Jeff. Where are you placing your strikes? It looks like you’re somewhere around 92% OTM. Is that about where you usually sit with UVXY when you open a position?
- Jeff 7:42 am on Thursday, February 11, 2016
  
  I have multiple positions over multiple expiries. These particular weekly trades are about 25-30 points OTM. We haven’t seen that kind of weekly move since August, so the strikes are fairly safe. Percentage OTM is less important that looking at the UVXY weekly chart and trying to stay well outside of the weekly ATR (average true range). Currently, the weekly ATR(14) is 11.40, and it peaked just above 15 in Oct/Nov). So selling calls 27 points OTM is a pretty good probability.
vxxkelly 7:52 am on Thursday, February 11, 2016

I’ve been doing a very similar thing, on spikes I’ve been selling core position Calls in the out weeks/month’s generally at or near the highest available strike. Then as the expiration gets less than 21 day’s, I opportunistically add positions like you are describing.

I’m managing my delta by keeping well out of the money and always maintaining the ratio where 50% of my open positions must be less than 21 days to expiration.
Jeff 9:27 am on Thursday, February 11, 2016

Added another at 1.30