NaughtyPines
Short

LOW VOLATILITY CYCLE -- CONSIDER GOING LONG VIX PRODUCTS

AMEX:SVXY   PROSHARES SHORT VIX SHORT-TERM FUTURES ETF
As a bread-and-butter, premium selling, index ETF trader (SPY/IWM/DIA/QQQ), low volatility environments are not favorable for my type of trading. My alternatives are to either just sit on my hands and wait for volatility to return or do something else, such as earnings plays or VIX             trades.

For some reason, I have taken a liking to shorting SVXY             as compared to going long UVXY             if prices are right in the underlying. I don't know what it is; I just seem to have trouble getting fills at the mid price in UVXY             ... . Although I would like the price in SVXY             to be higher, it is high enough to generate sufficient credit for my tastes via short call verticals on relatively short expiry time frames (two-three weeks max) with the short call leg at or above the 98 strike.

Example:

Sep 4th 98/101 SVXY             Short Call Vertical
POP %: 70%
Max Profit/Loss: .93 credit/contract; 2.07/contract
BE: 98.93

Notes: Due to the short time frame involved, I generally look to take these off at max profit or very near to it. Naturally, this is a very "play it by ear" sort of thing. If price appears to be flirting with my short call strike at any time before expiry (i.e., it's uncomfortably close to it), I generally opt to roll the setup out for duration and credit, especially when I've gotten in at a break-even above resistance ... .
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