ncroadrunr 11:37 am on Friday, April 29, 2016
Tags: ReverseRoll ( 144 ), ReverseRolling ( 14 )

$NUGT

I don’t know how anyone makes money with this. I got creamed with a strangle 10 wide (expiring today) Wed when it was selling for 87. My 98 call is deeply underwater, and I expect rolling it out to March 20 will only compound the loss. I normally cover a short calls for small gain but thought I had enough buffer. What do the experienced $NUGT traders think is a smart strategy?

#reverseroll

#reverserolling

Jeff 11:40 am on Friday, April 29, 2016

Best bet is to try to roll when they get ATM and not too far ITM. That said, I have allowed a few to get pretty deep ITM as well. Being a short seller becomes quite difficult on runs like this. Look at the chart from October… that was a good one, because we got a decent spike, sending some calls underwater but allowing us to sell more. Then it quickly retreated. Now, there is no retreat in sight. I have been #ReverseRoll, so selling puts when I have to close calls. This has worked for the last few weeks, even when the put sales are aggressive.

Would love to see comments from the other sellers too…
- Ian 11:52 am on Friday, April 29, 2016
  
  I would love to sell puts on these but these stocks scary me. They move so quickly. Got burned bad in the past with uvxy and svxy.
  - Jeff 12:01 pm on Friday, April 29, 2016
    
    Best to just stay away, or take the loss and build it back some other way. Like KOLD was before it, these have been too difficult to trade lately unless you have a gigantic account and can wait weeks or months for things to settle.
- gmb109 12:03 pm on Friday, April 29, 2016
  
  Jeff: When you say “reverse roll” I assume the following:
  First you BTC a losing Call position that say is $10.00 underwater;
  Second you STO a PUT position and obtain a premium of say $3.00, you are then
  left with a $7.00 loss on the losing Call position. At this point you are assuming
  that the trend is continuing up and the PUT will expire at $zero and you can book
  the $3.00 premium as an earned credit. Therefore if this can be done enough times
  you would slowly reduce the losses on the underwater Call Side. Is this correct
  understanding of “reverse roll” ???
  - Jeff 12:14 pm on Friday, April 29, 2016
    
    Yes. In addition to that 3.00 put, I would likely sell more puts later, on a pullback. I’m not trying to make back everything on the same day. In hindsight my mistake has been to become complacent when it quiets down, like it did end of last week. That was a chance to close some more calls and sell more puts.
    
    Sometime, when EVERYONE thinks something’s going higher, that will signal a top. But other times when everyone thinks that, like Gold since the beginning of the year, it just means that they all keep buying it!
    - gmb109 12:18 pm on Friday, April 29, 2016
      
      OK, got it. Yes any recapture would have to be over a period of time, long slough to get back to even any way you look at it. And just about the time you would decide to jump onto the directional Call side it would roll over and cause more damage. :-))
- ncroadrunr 12:24 pm on Friday, April 29, 2016
  
  I am considering allowing shares to be taken, leaving me short. Then begin selling puts at 98 or 100 out 2 to 3 weeks to reclaim
  losses gradually. It appears NUGT spikes up for a few weeks and then contango eventually forces the price back down. Is this correct or am I inviting a margin call if price continues up another $10 or $20?
  - Jeff 12:40 pm on Friday, April 29, 2016
    
    It is correct under normal circumstances, yes. But it has not been normal lately. This surge will eventually end and it will find its way back down to new lows. But you must be ready to handle much higher prices if that happens first.