fuzzballl 9:42 am on Thursday, August 17, 2017
Tags: LongPutDiagonals ( 56 ), SyntheticShortStock ( 108 )

UVXY

#LongPutDiagonals #SyntheticShortStock -Adding here. Could’ve moved up to 35’s but to keep things simple I’m staying with the same strikes for now. Waiting to sell any additional puts.

Synthetic short stock with disaster long calls (17.25 debit)

Sold UVXY JAN 18 2019 30.0 Calls
Bought UVXY JAN 18 2019 30.0 Puts

Long call for possible disasters capping potential losses:

Bought UVXY JAN 18 2019 40.0 Calls

Jeff 10:03 am on Thursday, August 17, 2017

What level would you consider “disaster”? What will be your action? Close the entire trade? Sell the 40 longs and leave the rest?
- fuzzballl 10:07 am on Thursday, August 17, 2017
  
  I would consider a move similar to 2015 to be a disaster. Not sure about the numbers but it seemed like UVXY went from about 25 to 100. A move like that I would definitely be tempted to peel off a few of those longs for big winners.
  - Jeff 10:10 am on Thursday, August 17, 2017
    
    It is almost the same price to just buy the puts. Why do you feel this is better? It seems the only advantage is the long 40’s in case there’s a huge spike between now and expiration.
    - fuzzballl 10:13 am on Thursday, August 17, 2017
      
      Exactly. Had another friend point this out to me. Can also look at it like buying a long put and selling a call spread. With UVXY almost assuredly much lower by 2019 I like having that “call spread”. It reduces the cost of the long put by a couple bucks right off the top and does leave the potential for some big gains on a huge selloff.
      - Jeff 10:15 am on Thursday, August 17, 2017
        
        If a huge spike, do you think you would peel off just the long 40’s or close the whole call spread?
        
        fuzzballl 10:20 am on Thursday, August 17, 2017
        
        I wouldn’t close the whole call spread since it would be showing a big loss. For each long I booked my margin requirements would go up since I’d be uncovering some of the short calls that make up the synthetic position. I’d just have to analyze it at the time and see what I could safely handle. If nothing else, just keep plugging away at the put sales and have a decent winner at the end.
        
        Jeff 10:20 am on Thursday, August 17, 2017
        
        In for 1 at 17.20
- fuzzballl 10:09 am on Thursday, August 17, 2017
  
  Would definitely not close the synthetic short position since it’s so far out. I remember 2015 holding December 50/60 call spreads all the way through the spike. No stress whatsover since they were spread. Eventually turned into an easy winner.
- hcgdavis 10:19 am on Thursday, August 17, 2017
  
  Hedges always cost money and decrease ROI but save your bacon if a company goes bankrupt or an ETF heads to zero or 25 on the SVXY like it did Aug. 2015.
  - hcgdavis 10:27 am on Thursday, August 17, 2017
    
    the opposite of this on the SVXY would be sell the 2019 70 put, buy 2019 70 call, sell the next week 8/25 78 call and buy the 2019 60 puts for debit of 17.95 or so.
    
    Max risk risk $1000 per contract. Max gain next week $410 per contract. If it goes ITM roll the calls up and out. Every 1 point up would increase profit by $100 per contract.
    
    I am not doing this at the moment, don’t have the cash but with the VIX spike wish I could. Maybe next 1-2 weeks I can set up.
    
    Good luck!
    - thomberg1201 11:01 am on Thursday, August 17, 2017
      
      Great discussion!

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