MoneyPatterns

SPXS - Bearish SPY Alternative

AMEX:SPXS   DIREXION SHARES ETF TRUST
I AM NOT ENTERED IN THIS TRADE
I will update on Monday 12/30.

Reading a chart from Unwind, he suggested to find a inverse SPY ETF . Credit to him for the suggestion.
I came across SPXS which is "3x inverse exposure to SP500 index" https://www.etf.com/SPXS
This idea is meant for bearish bias on SPY , considering we are at ATH's and capital gains starts in January.
If you have same opinion of market conditions, let me know what you think or if you have an alternate idea.

Chart Details
Price above $13.94 confirms bullish EMA cross.
10WeekMA around $14.60 – re-analyze bullish trend continuation or exit below trade for profit.

Entry Options
- Jan. 17 expiry. 12/17 Put Credit Spread. Take in $3.90 Credit (as low as $3.80). Max loss at $3.80 is $120. Max loss at $3.90 credit is $110. Max gain possible is $390.
Exit at 50% profit or your risk tolerance. Must exit before expiry.
One leg of this spread is 92% POP. Other leg is only 5%. Total is over 85% POP.

About Me
Thank you for liking, commenting, throwing up a chart, following, or viewing.
I am not a financial advisor. My comments and reviews are based on what I do with my personal accounts.
I am transitioning to my new website https://www.moneypatterns.com and will be updating my username here. Same guy - new name. :)
Website will be ready for launch mid-January 2020. Thank you for your patience while I try to juggle everything and maintain the same standards.
Disclosure - I am long BTCUSD , GBTC .
Trade active: Filled at $3.80. Jan 17. 12/17 Put Credit Spread. I will update with progress.

Comments

Ahhh I see... NVM, its SPXS the inverse ETF... so you shorted puts you expect to become worthless on ^Volatility, as SPXS jumps. Now Im tracking- clever strat!

In a similar way, look at UVXY after a VIX spike, it always decays rapidly and buying puts on the 1.5x VIX ETF after a VIX spike is almost always a winner!

See Hungry_Hippo's post on why we don't hold UVXY lol- a real eyeopener!!!
Reply
MoneyPatterns DaddySawbucks
@DaddySawbucks, Yes. I also agree with Hungry Hippo about theta (time decay).
This is WHERE selling options comes into play. When you have a credit spread - you get PAID for theta.
Time goes - we get paid. This is why I like credit spreads.
Clock never stops and theta works in my favor with credit spread. :)
Reply
DaddySawbucks MoneyPatterns
@MoneyPatterns, Yes indeed if it doesnt move you still win, they run down... R/R is good when prices so high, further upside in equities probly <1% atm. Ty for post & comment, HNY!
Reply
Im not sure Im tracking ur position- u shorted puts for a credit? Dude, you could get killed!

I trade debit spreads- buy a long term put, short far OTM near-term. Risk is limited to the purchase cost.

In a credit spread risk is theoretically the price of spread, but in practice is greater, because of slippage and illiquid pricing in the OTM long contracts.
Reply
MoneyPatterns DaddySawbucks
@DaddySawbucks, Debit spreads are low probability trades. Credit spreads are high probability trades.
I buy the lower put to limit risk. I sell the higher put knowing it will lose value as the stock goes up.
I take a premium and give back less money (buy back the spread less than I sold it for).
Just like an insurance company.
Yes - car could crash and I would have to pay out like insurance. But chances are low.
Risk is limited to the Credit (which isn't my money) and my risk (my money).

http://traderyam.blogspot.com/2017/01/option-strategy-cheatsheet.html
Reply
SPXS is a definite buy but you wont get much bang for your buck here, unless you've got a lot of capital. Try longing the VIX index with another 3X leveraged product; UVXY. Anything under $13 with UVXY is a steal and given the SPX is on the cusp of a wave 4 down (IMO back to 3,000 or 7%), the VIX will soon spike. I trade UVXY and it's great - you can double your money in quick time.
Reply
@MJC77, I totally agree with your wave count and the 7% drop (or more).
I have been using VIXY which is about the same as UVXY.
But sometimes the options greeks work slightly different.
Maybe I will look into a UVXY credit spread along side a VIXY credit spread for a head to head comparison.
Thank you for stimulating my thought process :)
The SPXS credit spread above closing at 50% profit -returns approx $195 for $110 of risk.
+1 Reply
DaddySawbucks MoneyPatterns
@MoneyPatterns, THeta decay in VIXY is less so u can hold it longer, would not sit on UVXY more than a week, you can see it dwindle in ur account, LOL!
THese ""ETFs"" contain ONLY futures contracts, no real equity, no real property, pure speculative bets. As the clock runs the contracts in them run down like options.

Adjusted for splits, UVXY trading at $13 is down from $31,880,000 PER SHARE, after only seven years!!! All those worthless contracts expired...
Reply
MoneyPatterns DaddySawbucks
@DaddySawbucks, I totally agree. If we look at any ETF really, there is no liquidity (but who's counting LOL).
Any options strategy I enter or recommend is meant for weekly income.
Only if I buy a put or call farther out do I hold.
But last few times fundamentals are ignored when I buy single put/call, so only short entries for now.
Only shares I hold currently are SPXS for a week. GBTC in my ROTH IRA. Everything else is options.
I also think some of the previously high share price was due to splits/some other sort of share manipulation.
There is no stock which starts at $32Mil a share
Reply
@MJC77, So I thought also but look at Hungry_Hippo's chart on how UVXY fades, it has significant and real time decay, this ETF actually does run down like an option and the current price, adjusted for reverse splits, is down from $32m in 2012- OW! Yep from $32,000,000 to $13... helluva investment!

You do NOT want to hold this more than a week, or two at the very most. Decay is real; if VIX sudden spikes this will make real money but if not it definitely dwindles, I saw this in my own account after just 3 weeks:

https://www.tradingview.com/chart/UVXY/ZEnsQ7kL-UVXY-Why-it-s-a-bad-idea-to-hold-this-long-term/#tc2931279
Reply
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