ProShares Trust Ultra VIX Short Term Futures ETFArca
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Markets rallying to ATH has VIX/VXX/UVXY at highly oversold levels. If the trend from the last month or so holds, then UVXY is right in the buy zone on the 2h. I can't say it won't sink lower, but this region for the last month has been prime for support.
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Lets see what next week holds. UVXY settled to a nice bottom and both the MACD and RSI are on the rise. Don't know if next week will be big, but should be some form of spike. At least that is the bet that I placed.
Note that these charts have extended trading hours enabled for the 2h
1h day trading
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Mondya morning 8:40am. Sitting on the bottom of my buy zone box. Lets see if it holds or it drops down to the green support trend line.
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After a promising start to the day, UVXY has taken a dive most of the afternoon is down below the $10 level that it has to this point been strong support. Thank goodness for stop limits.
Yea it’s like UVXY is super confused lol. So much selling it should be pushing zero but so much market risk it should be pushing 40.
Spotshooter1983
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Beautiful chart
Here is how I do it posted and copied to here:
As/if this drops further I will be selling more of the $9 strike March expiration cash secured puts. I have sold and bought these starting at around 75 days to expiration at $1.65 per contract and the common at $10.50 range. My cost if put to me at $9 is now somewhere in the $7.00 range.
Short is always the downward trend. Hence my main UVXY strategy is selling relatively short dated 50 delta puts against cash. Seldom is the price reached.
If the common drops into the $10 range I will sell more of the $9 strike puts for March.
I will close these out at 21 days and likely move out to one of the April weekly as these become available.
But the possibility of the next black swan always looms and takes cash from the unwary long common or long call buyer. there is always time to get long - for me that is when there is a sustained rise at twice average true range. I gave back a little when twice average true range was reached and sold a call vertical last week on the Reddit mob possibly wrecking the broker dealer settlement network narrative. On the drop back I liquidated my call position for a loss.
Yesterday I sold more of the $9 strike March puts against cash.
There is time to get in to the upside if the price appreciates at twice the average true range -the indicator I use to limit call buying expense. Really just the opposite way to avoid the call time decay.
Youare trading the channel from oversold to overbought. This too is a wise strategy based on the movement from top to bottom in the channel. Tony Zhang posted and interesting hedge chart yesterday on options play and on YouTube showing the number of drawdowns over a 276 month period. There are very few catastropic movements downward so your iteration and my similar strategies are ways to gain from the multitude of minor disruptions over time with relatively few losses.
Todays $8 strike March puts look very good for anew investor.
Clearly buying calls at the bottom of the trend line has outperformed my cash secured put strategy over the last 2 months that I have harvested cash to reduce cost. Very nicely done. the saying "markets give us what we are looking for" clearly applies. I've been extremely conservative over time with the UVXY contract.
Excellent game.. well played..
Happy trading
all the best
ProfitHarvest
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Got a couple interesting false breakouts the past week...
kishnara
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@Dr_Roboto, It has been trading near $10 for the last few months.
Dr_Roboto
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@kishnara, that is a good thing. We have come back down off the spike (hopefully some profits were taken) and time to load up again. The $10 level is showing great support. UVXY spikes often and is great for harvesting lots of easy profit during those spikes. Last weeks spike could of earned you 60%. I personally don't buy and hold it for long periods of time.
kishnara
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@Dr_Roboto, With more trillions in stimulus, we'll trade at these levels for years.
Volatility will trade at these levels with those glorious spikes like Volmageddon February 2018. that was $18 to $38 in four hours. The Iranian General spike and of course SPY held down twice average true range for one week then spiked from $12 to $17 in that week and then to over $130. welcome to the reason so many buy this lottery ticket.
With the monthly roll absent the black swan/volmageddon events there is a monthly roll of the contracts and the management fee. Hence the long term trend is always down.
But here is a curious point to consider
For the last 20 years and six months (276 months)
There were 4 monthly declines of 10% or more in SPY.
There were 30 declines of five percent or more in SPY.
There were 42 months with a 3% decline in SPY.
76 months saw declines in 276 months for a full month.
therein lies the trading opportunity.
Many folks I assume are drawn to the lottery ticket and buy outof the money calls.
I just sell cash secured puts below the lowest price in relation to the bottom of the trading range and buy these back on the rises.
I am drawn to the put side of the equation because the time decay pays me every day and I can buy the puts back cheap on the rise in volatility. I am careful to wsatch for ProShares reverse splitting the common. that's the main worry for this strategy..
Like everything it has its moments but there are those moments for my strategy where I too buy those naked calls. I sold a call vertical on the last rise towards $14 and got out on the drop. I make my lower strike in the call vertical an in the money position so it erodes more slowly. I use the 45 day type call options so that I have more time and the reversal does not wipe out all of my upside.
In the past I just waited for twice the average true range bump and then bought. That is after I make a decision to buy back the puts which are eroding nicely as the price moves away from the strike ((currently the $9 strike) accelerating at twice the average true range to the upside. This is profitable. the risk is that I am buying calls as the price of the calls rises.
The call buying and put selling at the bottom of the range is a great tool EXCEPT immediately after the reverse split of the common by ProShares. Usually there is a wave of put buying after the splits as UVXY is really the same but appears to be trading at much higher levels based solely on the share price after the usual reverse split. Then the puts must be more like 30 days to expiration when sold far be low the bottom of the range if at all.
Again it might be ok just to be short the common always if it is in a very large account. At least for the 200 months that SPY does not trade down the prevailing sentiment dominates.
On the February 2018 morning where all markets had closed down worldwide, all futures were down, every commodity weas down and the US Dollar was down, UVXY opened premarket and moved at regular market open to $18. Then in 4 hours moved to $38.
That reason alone is my reason to believe I can catch the play to the upside with naked calls and logically get paid on most if not all of the 276 months where we have SPY data while getting paid daily on the erosion of time value in out of the money put contracts.
the indicators in the above chart are excellent.
I will continue with my strategy but add to it a few contracts as UVXY hits the bottom of a current trading range.