UVXY - Exiting Your Hedge / Perfect AMD Hedge
0. As always see my other posts for AMD background and analysis.
1. So you own a CALL SPREAD on the UVXY, or you bought the shares themselves. In my case I am hedging a large corporate and personal position in AMD. We are always long the equity (AMD). The correlation to AMD inversely is above 90 percentile, and can
be easily calculated based on your position size. So the VIX just spiked hard due to "apparent" retaliation by Iran. Now if you own options, you can't do anything until the market opens at 9:30AM EST. You will have to wait. The spreads will be massive, and if you
own a SPREAD, it is even worse. You CANT sell in the first 10 to 20 minutes, you need to let the futures settle, and spreads to tighten or you will get robbed. You also need to consider the sentiment in the morning. If you also look at the opening charts, and spreads and try
to place a sell order close to the ask price, and not the bid. The bid comes up to the ask during the first 15 of trading, and you get jipped (slippage) if you dump on the bid... Badly. So wait until about 10am. Tensions will still be high. If you feel we may run higher
as people don't sell equities but run for PUTS, that will take us higher, and the market can go up at the same time. Historically, these types of political events are very short-lived spikes on the VIX, so probably best to take profit right away, wait for the dust
to settle and buy it back.
2. If you own UVXY shares. You can start dumping at 7:30AM. Don't do it. They bottom usually around 8:30am and go back up hard until the open. Wait until just before 9:30 to sell them in the pre-market. If tensions are high we may go higher. They tend to plummet right at the open at 9:30AM, especially
with Trump and crew out in full force tomorrow with the press conference.
If you feel we may run higher as people don't sell equities but run for PUTS, that will take us higher, and the market can go up at the same time. Historically, these types of political events are very short-lived spikes on the VIX, so probably best to take profit right away, wait for the dust
to settle and buy it back, that is what it is designed for.
3. You need to judge if the VIX is going to remain high, I would venture it won't and you should exit your position tomorrow.
Cheers.
1. So you own a CALL SPREAD on the UVXY, or you bought the shares themselves. In my case I am hedging a large corporate and personal position in AMD. We are always long the equity (AMD). The correlation to AMD inversely is above 90 percentile, and can
be easily calculated based on your position size. So the VIX just spiked hard due to "apparent" retaliation by Iran. Now if you own options, you can't do anything until the market opens at 9:30AM EST. You will have to wait. The spreads will be massive, and if you
own a SPREAD, it is even worse. You CANT sell in the first 10 to 20 minutes, you need to let the futures settle, and spreads to tighten or you will get robbed. You also need to consider the sentiment in the morning. If you also look at the opening charts, and spreads and try
to place a sell order close to the ask price, and not the bid. The bid comes up to the ask during the first 15 of trading, and you get jipped (slippage) if you dump on the bid... Badly. So wait until about 10am. Tensions will still be high. If you feel we may run higher
as people don't sell equities but run for PUTS, that will take us higher, and the market can go up at the same time. Historically, these types of political events are very short-lived spikes on the VIX, so probably best to take profit right away, wait for the dust
to settle and buy it back.
2. If you own UVXY shares. You can start dumping at 7:30AM. Don't do it. They bottom usually around 8:30am and go back up hard until the open. Wait until just before 9:30 to sell them in the pre-market. If tensions are high we may go higher. They tend to plummet right at the open at 9:30AM, especially
with Trump and crew out in full force tomorrow with the press conference.
If you feel we may run higher as people don't sell equities but run for PUTS, that will take us higher, and the market can go up at the same time. Historically, these types of political events are very short-lived spikes on the VIX, so probably best to take profit right away, wait for the dust
to settle and buy it back, that is what it is designed for.
3. You need to judge if the VIX is going to remain high, I would venture it won't and you should exit your position tomorrow.
Cheers.