fuzzballl 7:30 am on Friday, May 12, 2017
Tags: ShortCalls ( 979 ), VXXGame ( 769 )

SVXY experiment

#ShortCalls #VXXGame – Looks like my tiny stock position will go away today so will be needing some protection for a bunch of Jan 2018 short calls. Even though all the strikes are above even my most aggressive projections for SVXY, I’m trying a new style of “protection”.

Sold 3 SVXY JAN 19 2018 200.0/190.0 Bull put spreads @ 7.20

If she continues up towards my lowest SVXY projection, this makes nice cash prior to any short call strikes getting hit. If it tanks, no matter how low it goes, I’ll own the stock 2.80 below where it’s trading at the time.

Anything between 200 and 225 (my lowest call strike) everything is a max winner and 2018 will be off to a great start. Reasonable protection for cheap with very little downside risk. I like it!

EDIT… ” I’ll own the stock 2.80 below where it’s trading at the time”.

jsd501 8:16 am on Friday, May 12, 2017

I am confused. If you sell the 200 put and buy the 190 put for a credit of 7.20 and, if it is below 200 in January, you will be assigned and own it at 192.80?
- hcgdavis 8:23 am on Friday, May 12, 2017
  
  Now I see why you guys trade this so much, just looked at the chains. Big premium a month out and decays quickly in 2 weeks. But yeah as you told me earlier, make sure you can cover it if assigned.
  
  Thanks
  - jsd501 8:24 am on Friday, May 12, 2017
    
    Shsh, don’t tell anyone.
    - hcgdavis 8:30 am on Friday, May 12, 2017
      
      The 35 DTE delta 8 strike which currently is the 109 strike is trading for 1.3-1.79 and decays 50% in 1 week and 75% in 2.
      
      I won’t tell anyone outside this group but more traders may tighten the bid-ask spread.
      
      Thanks for the heads up!
      
      Good to take the bets instead of make the bets. I will do a 1 lot and see how it plays out. If there is a vol. spike will hedge.
    - hcgdavis 8:45 am on Friday, May 12, 2017
      
      the 42 DTE decays 25% in week!! An Aug. 24, 2015 shock would put them all ITM so have to keep size small and be able to cover, but the rebound after being assigned would be great.
- fuzzballl 8:43 am on Friday, May 12, 2017
  
  Let’s say it’s trading 50 at expiration. That day i would close the long put for huge gain and let the short put get exercised. Difference should be right at 2.80 on expiration day regardless of where SVXY is.
  - jsd501 9:03 am on Friday, May 12, 2017
    
    Got it, thanks.
hcgdavis 8:18 am on Friday, May 12, 2017

I like it, may follow as my first volatility trade, 1 contract, thanks. But may adjust the strikes.