Skewed Strangle on UVXY
After a brief moment of Backwardation this week in the term structure of the Vix futures, we came back into Contango. To me it looks like there is still some fear and buying protection is not getting cheaper, especially with earnings coming up on some of the big dogs. I believe volatility will start to come off during the next couple of days, so I want to add to my core short volatility trades.
UVXY Implied volatility is still very high so I decided to sell some premium.
I sold the 12/8 Strangle for $2.60.
What can go wrong? If UVXY rises over 35% in the next 42 days I will get assigned 100 Shorts per contract. I don't mind being short volatility since that would just be an addition to my already core shorts (Part of the plan).
Getting long is another ballgame, and one I don't like that much (So I skewed the Strangle to the downside). But for this to happen First UVXY would have to drop over 48% in the next 42 days. If that happens I will be pretty happy making a killing in the rest of my Shorts. On this one, I would take the assignment at the $8 price with a cost basis of effectively $5.40. That is a pretty low price (Most likely would have reverse split by then) and I am sure I can Sell some Calls after to get out of the trade on top.
The trade:
Short 12 CAll
Short 8 PUT
Credit received $2.60
Probability of profit is 63%
UVXY Implied volatility is still very high so I decided to sell some premium.
I sold the 12/8 Strangle for $2.60.
What can go wrong? If UVXY rises over 35% in the next 42 days I will get assigned 100 Shorts per contract. I don't mind being short volatility since that would just be an addition to my already core shorts (Part of the plan).
Getting long is another ballgame, and one I don't like that much (So I skewed the Strangle to the downside). But for this to happen First UVXY would have to drop over 48% in the next 42 days. If that happens I will be pretty happy making a killing in the rest of my Shorts. On this one, I would take the assignment at the $8 price with a cost basis of effectively $5.40. That is a pretty low price (Most likely would have reverse split by then) and I am sure I can Sell some Calls after to get out of the trade on top.
The trade:
Short 12 CAll
Short 8 PUT
Credit received $2.60
Probability of profit is 63%
交易進行:
Ouch! What a day.... Vix went up a record day high of over 100%. Good thing is that eventually it will come back down.
The Volatility curve is in full Backwardation so I bought /VX futures to hedge. I bought 1 /VX future for every 100 shares of UVXY.
The Volatility curve is in full Backwardation so I bought /VX futures to hedge. I bought 1 /VX future for every 100 shares of UVXY.
