VIX For What It Is Worth

From a column from Stansberry Digest

A couple years ago, I downloaded all the VIX’s closing-price data since its inception in the early 1990s…
I discovered that the long-term average was around 19… but the long-term “modal value” – the value that appears most often – was about 12. In other words, the VIX spends more time at about 12 than any other value.
For a brief time, I tried to use this information to trade VIX futures… I roughly broke even. But more important, I learned a lot about these futures, which I’ll never touch again.
You see, VIX futures are defective. They simply don’t work.
The nearest-term contract (called the “front month”) should roughly reflect any moves in the VIX. But when the VIX soars, this contract doesn’t rise nearly as much as the VIX itself… If the VIX doubles or triples, you’re lucky to get a 50% move higher from the front month. And it’s worse for the second month, the third month, and all the other months.

This disconnect happens because there’s no real tie between the futures and the VIX. There’s no deliverable VIX commodity… like you have with gold, pork bellies, wheat, or Malaysian palm oil.
VIX-related exchange-traded funds (“ETFs”) are based on futures, so they perform poorly, too. These ETFs are some of the worst garbage securities on the market…
Some VIX-related ETFs are debt-based, meaning buyers basically lend money to investment bank Barclays or another big institution… with zero promise to get repaid… and zero interest payments along the way. That sounds like a pretty good deal for Barclays!

Now, I want you to look at a long-term chart for one of these VIX-related ETFs…
The iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) is the biggest VIX-related exchange-traded product. VXX has about $878 million in net assets today. (“ETN” stands for exchange-traded note, which just means it’s debt, not equity like an ETF.) Take a look…


As you can see, the chart looks a lot like a ski slope, falling from the left to the right… a record of endless value destruction. To me, VXX – and all the other VIX-related ETFs – is nothing more than a legal scam to separate unknowing investors from their money.
You shouldn’t get all technical with trading VIX futures. Instead, there’s a much better – and safer – way for investors to “buy volatility” and profit from rising fear in the markets…
Hold plenty of cash and own some gold.
In a serious equity rout – which almost nobody is predicting right now – those two assets should treat you well. They’ll protect your wealth… and allow you to take advantage of all the countless cheap opportunities that arise when other investors have been wiped out.



$ANET STO 2/21 185/200 BUPS at 1.80
$SWKS STO 1/24 125/130 BUPS at 1.41 Earnings tonight

$GSX STO 2/21 40 calls at 1.85
$ROKU BTC 1/24 150 call and STO 1/31 144 call at 1.31 added credit.
$HIQ STO 2/21 40 calls at 1.85


STO 110/145 strangle for 1.65 Feb. 21 expiration. Thanks Jeff.


#ShortPuts – With a move like this I’ve gotta book it for a quick double dip on the earnings move.

Bought to Close NFLX FEB 07 2020 310.0 Put @ .76 (sold for 2.75)

ISRG Earnings

#ShortPuts #Earnings – Probably pushing my luck here after trading the “pre-earnings” announcement last week (whatever that is 🙂 ) but here goes. Selling at the expected move and just above the 50ma.

Sold ISRG JAN 24 2020 595.0 Put @ 3.00

Been out all day hanging with my daughter at Mizzou…

ZUO Buy/Write + Long Put

I got this new job at Salesforce, so I’m avoiding trading $CRM due to legal ramifications.  I read an article on Zuora, $ZUO, late last week and decided to go long 100 shares at $15.87 and sell a Feb 21 $16 Call at $0.65.  Sold a Feb 21 $15.00 Put a day or two later at $0.45.  I guess employee #11 at Salesforce founded the company, and Marc Benioff invested $6MM in first found of funding, which is now worth about $40MM.  Article said it would be a probable target for M+A, both due to Benioff’s familiarity with the company as well as it’s total compatibility with Salesforce’s software.  It’s been trading in a range, so I think I’m going to sell puts, and covered calls against it for a medium-long term range.  Salesforce has acquired well over 50 companies in the past 14 years or so.

SWKS earnings analysis

#Earnings $SWKS reports tonight. Below are details on earnings one-day moves over the last 12 quarters.

Nov. 12, 2019 AC -0.44%
Aug. 7, 2019 AC +0.46%
May 2, 2019 AC -3.51%
Feb. 5, 2019 AC +11.49%
Nov. 8, 2018 AC -8.08% Biggest DOWN
July 19, 2018 AC -5.35%
May 3, 2018 AC +4.28%
Feb. 5, 2018 AC +10.44%
Nov. 6, 2017 AC -4.41%
July 20, 2017 AC -0.15%
April 27, 2017 AC -4.28%
Jan. 19, 2017 AC +13.01% Biggest UP

Avg (+ or -) 5.49%
Bias 1.12%, positive bias on earnings.

With stock at 128.00 the data suggests these ranges:
Based on current IV (expected move into Friday per TOS): 120.94 to 135.06
Based on AVERAGE one-day move over last 12 quarters: 120.97 to 135.03
Based on MAXIMUM one-day move over last 12 Q’s (13.0%): 111.35 to 144.65
Based on DOWN max only (-8.1%): 117.66

Open to requests for other symbols.

SPX 1-dte

#SPX1dte Sold to Open $SPX Jan 24th 3265/3285-3350/3370 condors for .80, IV 9.14%, SPX 3323.

AIMT long call

Still got the other biotech plays on deck, but read up on $AIMT a couple of days ago.  I went long a Feb 21 $35.00 Call at $3.10 on Tuesday.  They are awaiting word from FDA on approval for the only “drug” for Peanut Allergy.  Their main competitor failed Phase 3, and they had an Advisory Committee meeting recently which voted 7-2 in favor of it.  It’s a specific dose, de-fatted peanut protein which is given in increasing titrating amounts until the patients can have no adverse effects from eating about a single peanut.  Figured I’d throw my hat in the ring– FDA is expected to give thumbs up or down late January, so maybe hold it for a week or so.

SPCE Long Butterfly

BTO $SPCE 14/16/18 Put Butterfly for Feb 21.  This thing has been ridiculous this past week and I can’t afford to short TSLA.  $0.36 debit, for a one deep butterfly.

Closing GUSH

Bought to close $GUSH 6/19 50 calls @ .70. Sold for 5.20 and 5.50 on 12/31.

GSX STNE Puts / LK Puts Rolled

$GSX STO 2/21 30 put at 2.70. Chinese education stock. Thesis is corona virus improves
$STNE STO 3/20 40 put at 1.95. Thank you @jsd501
$LK BTC 1/24 46 put and STO 1/31 44 put at even. Waiting out the virus


BTO April 65/75 bull call spread and STO the April 57.5 puts for a debit of .50 cents.I like the chart.


BTO the April 29/34 call spread and STO the 24 puts for a debit of 1.10, gold looks good for a small trade.

UAL closed

#Earnings Sold to close $UAL Jan24/Jan31 85 #DoubleCalendar for .85. Bought for .46 on Tuesday.

$CTXS from yesterday not looking good; need a pullback.

ISRG earnings analysis

#Earnings $ISRG reports tonight. Below are details on earnings one-day moves over the last 12 quarters.

Oct. 17, 2019 AC +6.96%
July 18, 2019 AC -1.45%
April 18, 2019 AC -7.00% Biggest DOWN
Jan. 24, 2019 AC -3.93%
Oct. 18, 2018 AC -3.45%
July 19, 2018 AC -0.86%
April 17, 2018 AC +8.17% Biggest UP
Jan. 25, 2018 AC -2.12%
Oct. 19, 2017 AC +3.39%
July 20, 2017 AC -4.55%
April 18, 2017 AC +6.36%
Jan. 24, 2017 AC +5.09%

Avg (+ or -) 4.44%
Bias 0.55%, positive bias on earnings.

With stock at 612.50 the data suggests these ranges:
Based on current IV (expected move into Friday per TOS): 594.19 to 630.81
Based on AVERAGE one-day move over last 12 quarters: 585.28 to 639.72
Based on MAXIMUM one-day move over last 12 Q’s (8.2%): 562.46 to 662.54
Based on DOWN max only (-7.0%): 569.63

Open to requests for other symbols.