prvtrader 10:45 am on Tuesday, February 23, 2016

An open question on the UVXY trades.

The UVXY is the Pro-Shares Ultra VIX Short Term Futures ETF…so when the IV goes up it goes up.
So now that the market is going down, and VIX is goin up then the UVXY is moving higher.
But I see you guys selling BeCS on the UVXY.
Could some one tell me please why?
What is the reason for selling BeCS now when by waiting you may get a better price?
I’ve never traded this and would like to understand the reason for your trades.
Thanks,

fuzzballl 10:54 am on Tuesday, February 23, 2016

For me it’s a matter of scaling in with a bet that volatility will return to the mean eventually. By waiting, you may not get a better price either since this thing could be down 5 bucks tomorrow…so gradually adding as it rises seems to work pretty good. If someone could let me know when volatility has peaked I’ll wait and go all in then…LOL
- fuzzballl 10:58 am on Tuesday, February 23, 2016
  
  Also…my UVXY trades are rarely “one off” trades. Usually part of a bigger picture being sold against short puts or put spreads or in conjunction with some futures or possibly neutralizing delta against some SPX spread positions. More than meets the eye sometimes…try to stay fairly market neutral unless we get ot an extremely overbought or over sold condition.
  - fuzzballl 11:03 am on Tuesday, February 23, 2016
    
    Until the rise in UVXY today I was actually slightly long some deltas in the overall UVXY position. After the rise today and the sale of the call spreads I’m now short 136 deltas with nothing ITM so mega theta at this point with mostly short term positions through March monthlies.
    - fuzzballl 11:05 am on Tuesday, February 23, 2016
      
      Sorry, I like to talk a lot!
      
      🙂 🙂 🙂
      - prvtrader 11:15 am on Tuesday, February 23, 2016
        
        Thanks, I’m beginning to understand.
Jeff 11:28 am on Tuesday, February 23, 2016

Yes, all what @fuzzballl said… sell a little at a time as volatility rises. Usually the moves are short-lived and the positions lose value quickly. With bigger, sustained moves, you end up holding longer, and maybe going ITM with some or rolling. But even in the high volatility market, UVXY is soon dragged back down and positions eventually expire. You must have margin available for violent spikes (if naked).
- prvtrader 11:30 am on Tuesday, February 23, 2016
  
  It is a system in itself…I’ll look at doing something on it. Thanks.
sasquatchonline 11:34 am on Tuesday, February 23, 2016

It’s tough to tell from where we are right now. There may not be another significant spikes for a little while and VIX 20 may be the new normal. I think there are systemic problems that will keep it up and QE infinity to keep it down. We may have a sideways market for a while because there’s nothing good on the horizon and there may not be any more shoes to drop, but who knows. For this reason I agree with Fuzzball and think it’s a good idea to be on both sides right now. Ladder/scale up, down, out, whichever direction you can think of but have your margin handy.
thomberg1201 12:45 pm on Tuesday, February 23, 2016

It typically moves in the opposite direction of the market which can make your head hurt figuring our puts and calls.
honkhonk81 2:15 pm on Tuesday, February 23, 2016

Hi, I thought your face looked familiar. ;>) . I can’t speak for others, but I’m not looking to make the last dime. True, the accepted knowledge is: Sell Puts when the underlying is down, and Sell Calls when the underlying is up. I try to sell puts against my long calls, and calls against short puts. As others have stated, tomorrow the price may not be as good, and as you have stated, “…by waiting you MAY get a better price, the operative word is May. So, if I’m happy with the premium, I’ll do the trade. It’s a personal thing, as it applies to your own situation, like Fuzzball has stated above. I’ll sometimes also follow others who are more knowledgeable than I am, Fuzz and Jeff, being two of many. So, if it’s good enough for them, and I like the trade, I’m in. Hope this helps.