NaughtyPines

UVXY OPTIONS -- NEARING DANGEROUS REVERSE SPLIT TERRITORY

AMEX:UVXY   PROSHARES TRUST ULTRA VIX SHORT TERM FUTURES ETF
Because UVXY             is subject to contango, it periodically has to undergo reverse splits to keep it from going to 0. The last split occurred in May of last year, when UVXY             was sub-10 and it is getting close to that area here.

In a nutshell, reverse splits wreak havoc with options positions ... . I won't go into the nitty gritty details here, but the Options Clearing Council (OCC) has a specific manner in which it handles options in reverse split situations, the result of which is "non standard contracts" with potential liquidity issues.

Because of these concerns, I'm shying away from playing UVXY             via options at all until after the split occurs or there is a volatility pop of sufficient depth to save it temporarily from a split. There are, after all, other instruments in which I can go long volatility without the headache of a potential reverse split occurring in the middle of my trade -- SVXY             short (which appears to have dodged the split bullet for a while), VXX             long (although there are even concerns with reverse splits in that instrument if volatility continues to hang in at low levels), and, of course, VIX             options.

Next one 7-17-17 to be 4:1 unlike prev. 3 so I can wait a week to see what is up. :-)
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Thanks! Had just closed out last 4 short call spreads Monday and Tuesday (sold on a bump and closed well enough in profit this week) but was unaware of this reverse split possibility, will have to look into it. Thanks aagain and Keep Smiling!
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@NaughtyPines Actually, CAN you go into the nitty gritty of this one for us (me)?

I've heard that theory before that the reverse-splits DO actually affect UVXY in some way, but I've never heard a full explanation for the theory as to "why?"...
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@ProBucks, My comment basically only apply to options. "Split" options result in nonstandard contracts that have liquidity issues ... .
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Tom1trader NaughtyPines
@NaughtyPines, You have that right, I do not waste a minute looking at stocks with low option volume, except for the occasional earnings play (12,000-15,000 or more daily) I look only at instruments with > about 25,000 daily option volume. It is a simple screen when a site has it; screen by price and sort by option volume.
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Tom1trader Tom1trader
@Tom1trader, Oops and of course nonstandard contract would be very hard to close, so many sources are always talking about expiration, the only times have ever held to expiration were short puts to buy the stock.
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