The Clean-Plate Club

This post may also be read at: http://www.cboeoptionshub.com/2016/07/21/clean-plate-club/

Little did I know how soon I'd be back to report on the status of the last line of my most recent post - specifically my declared hope/dream to be rid of the SVXY that became like a pebble in my shoe.

Yesterday (July 20th), when VIX scraped low in the elevens and SPX scaled a steep hill, I starting thinking about and fearing a future that might not include SVXY prices more attractive than those I was seeing point-blank.  Biting the bullet and sweating through the pain, I sold all shares of SVXY and then bought back all shares of TVIX, enjoying for the second the sensation of a clean plate, a fresh slate, and freedom from a position I had not been happy with since taking it on more than a month ago.

Then I turned attention to the fragment still left after cleaning up, the element making the plate NOT clean at all.  Perhaps as a balm to the recently acquired wounds (SVXY is what I speak of; not referring to the TVIX which never did a thing to harm me) I decided to leave my SVXY short calls (had previously been covered) undisturbed.  (Now naked.)  So all I could hope for was one direction for VIX and the other direction for its friend SVXY, and I'd call SVXY a friend as I'd reap (hopefully) the benefit from deflating premium on the calls I had sold (detailed in previous post).  Those calls were SVXY July29 61.50 calls, sold for $1.00 last Friday, July 15th.  Pictorial of the story is below:

Oops!  I gave away the ending to this story.  Today in a fit of fear that SVXY might rise again to bite me (no, more like rip my leg off), I made the decision - loathe though I am to ever take a loss - to buy those calls back for $1.10 each.  Two reasons went into the decision:  1. I didn't want to wait and see if this option would move against me even more than it already had.  Yesterday it traded for $1.60, and that was with SVXY never reaching so high as $61 during the day.  Significant moves higher in SVXY next week would inflict some real damage on me, I knew.  So I took the not-quite-even buying price and got out.   2. While I wanted to stick to my original plan and just have the shares called away from me next week and keep the premium, I had already negated half that plan (I had sold the shares), and after accounting for the risk I just mentioned in point 1, I didn't think waiting one week to learn the outcome of this trade was worthwhile or prudent.  In making the calls naked, I had turned the nice dog on a leash into a Tasmanian devil off the leash.

So that's all scrapped and I'm not very happy about it.  Let's total up all the gains and losses in the pile, though, to assess the exact damages:

As printed last week:

Above is one small collection of trades revolving around the SVXY position.  There is the $1,867 collected as short put premium; this resulted in the shares being put to me (you will see below that some were put to me early and some upon expiration.)  Also, there are two sets of covered calls I wrote against the shares after they were put to me; one set expired worthless and I booked $307 gain; one I bought back and booked $173 gain.

Add in the remainder of the transactions:

There are the lots of shares put to me; 600 shares assigned to me on Tuesday of the week of expiration and 200 shares assigned after expiration.  Then you see my sale of the shares today.  The difference is my loss on the shares.  Also above are the calls I wrote against the shares last Friday; today I bought them back at a loss of $107.  Not pictured is a fee I had credited to me by the brokerage as a courtesy, which the kids suggested be used to buy ice cream (and that we did.)

Adding the pluses and subtracting the minuses goes like this: Pluses: $1,867 + $173 + $307 + $20 + $48,230 = $50,597.  Subtract: -$39,020 -$13,020 -$107 and the end result is a minus figure of $1,550.

Let's not forget to mention TVIX shares sold short and then covered.  I mentioned in the last post that I had sold TVIX short at $1.60.

Yesterday (July 20th) I covered them at $1.37 and will look for a place to re-short.  See the first graphic in this post.  As of this writing (Thursday, July 21st at 2:40PM), TVIX is $1.45.  What is it as you read this post?  With the help of VIX, which I doubt will stay the same every minute from here on out,  I'll make sure we have plenty to talk about next time - you can be sure of that!

Baseball, hot dogs, apple pie, and... VIX shortcake

This post may also be read at: http://www.cboeoptionshub.com/2016/07/16/baseball-hot-dogs-apple-pie-vix-shortcake/

If you can't wear shorts in the summer, when can you?  At the time of my last writing, I was showing off a pair:  TVIX and UVXY, which everyone knows are really just two legs of the same thing (for my purposes, anyway).  Even though I had donned one leg before the other (I put my pants on one leg at a time, just like everyone else), I took them both off in one motion, as such:

But only one day later, my thoughts were consumed in the following manner:

From WikiHow's "How to Short Sell" http://www.wikihow.com/Short-Sell

Re-thinking my June 11th thesis that volatility was so low that it wouldn't stay that way, and that VIX shorters would be sorry, I pictured instead a basket of money brought in by selling people a medium-sized raft of TVIX.  Knowing that the basket might have to be carried over a bumpy ride (anticipating that the position might move against me sooner or later or even immediately), I went ahead and re-shorted anyway.  This time it was all TVIX, and 2400 shares short at $1.60.

All the while, my trading partner and I strained our brains over how to get rid of our SVXY position.  Those who have been following this saga as far back as June 8th will remember that we sold 65 strike puts on that day that resulted in the delivery of 800 shares to our account a few days later.  What started as a "take cash now, think later" move has turned into a complicated maneuver to try to get our money back.  Of course, we could just wait.  I feel confident that the value will come back and we could realize a profit on the shares at any time after that, but I don't know when that will be.  So we started counting up the transactions by which we could offset any loss upon selling the shares and call it something like even.  So far the positive closed trades connected with these 800 shares of SVXY, put to us at $65.00 per share, are as follows:

In order of date closed, that's the original sold puts for $1,866.56, some calls opened June 23rd that expired worthless the next day for $307, and some calls opened today at 10:58 AM and closed at 1:05 PM to bring in $173 (today's trade pictured below:)

Later in the afternoon today, we strategized on how to get rid of the SVXY we now wish we didn't have, and discussed at length how badly we wanted to ditch it, and what price/benefit ratio was acceptable (in terms of time, missed opportunity, freedom from aggravation, lost pride in bookkeeping, etc.).  Momentarily we had forgotten about the $307 one-day trade, and our math went something like this:

If we end up having our 800 shares of SVXY (for which we paid $65) called away from us on July 29th at $61.50 per share, we'd book a loss of $3.50 per share, or $2,800.  To make up for that, we already had (as circled in green above) $2,347 in profits (although we had forgotten about the $307, so we used the figure of $2,040 in our calculations.)

We settled this afternoon upon the strike of 61.50 for the July 29th expiration because we were able to get $1.00 per contract, for 8 contracts, bringing in just under $800, and we added that to the $2,040 we figured we had already brought in, which would total $2,840.  This would offset nicely the $2,800 loss we'd stand to take upon having the shares called away at that strike.  So we went ahead and sold 8 SVXY July29 61.50 calls for $1.00 each (placing the order at 2:59 PM and seeing it execute when we were out doing other stuff at 3:30PM.)  Now that we remembered (upon writing this post) the $307 booked on June 25th , it looks like we'll come out ahead by around $300 if we get rid of our SVXY to a hungry call-buyer two weeks from now, and we'll be able to forget the whole 1.5-month debacle.

In my next post, hopefully I'll be rid of the SVXY and I'll describe at that time why we're moderately in a hurry to get rid of it and the strategy we plan to replace SVXY put-selling with.

Profiting from the side dishes

This post may also be read at: http://www.cboeoptionshub.com/2016/07/05/profiting-side-dishes/

If it sounded like I had a little trick up my sleeve upon hastily closing my last post with a promise of quick and interesting updates, here's a confession:  Yes, one typing hand closed the post while the other was closing my TVIX short (see detail below).

Crown jewel of June 21st, an otherwise lackluster day

Everyone who lived through it will agree that nothing in particular happened on June 21st, but somehow I got a little shaken up inside and decided it was a good idea to close that short and take the money instead, going into the unstable week laced with Brexinsanity around every corner.  Of course, I learned a few days later that I could have held onto it a little longer, but that's nothing I could have predicted, so I willed my blood pressure down as I saw, two days later, TVIX prices fall as low as 2.33 (just about a full dollar under my initial entry point and 40 cents under my non-optimally-timed exit point).

To distract myself, I turned my attention on June 23rd to the large collection of SVXY that had been put to me (as shown in the last graphic of the previous blog post) and hunted around for some premium.  There wasn't a ton to be found, but I wanted a few dollars for my mental anguish (and reduced account value) so I looked for a strike I could stomach and a dollar amount that wouldn't be a total insult and settled on the consolation-prize figure of a few hundred dollars for taking on a one-day contract.  With SVXY trading at around $56 that day, I wanted to make sure I risked my shares being called away from me at a price no lower than the $65 I had, sadly, paid for them.  Actually, I did a little bit of computation and decided that, upon the unlikely event of my shares being called away, I'd be willing to book a loss on them roughly equal to the amount brought in on the calls I was selling that might effect that action.  So, with 64.50 as the strike and 0.40 as the premium brought in, I wrote that contract and enjoyed the full benefit of all premium brought in after it expired the next day worthless.

The option activity chart (below) for this contract is truly humorous, as you can see that while someone else jumped in there along with me, I was there for the very short duration of this contract's existence. I saw the story through from beginning to end.  From 0.40 to 0.00.

The next thing happening was on Friday, when I knew the option would expire, requiring no action on my part.  No distraction now prevented me from reflecting upon the TVIX short I wished I had not cashed in.

Sometimes my timing is not the best, and this was one of those times.  But instead of dwelling on it, I look forward to the day I'll cash in this short, just as I did the previous one, for some kind of profit.  As seen in the chart below, I decided on the morning of Friday, June 24th to stop thinking about it and just take advantage of the overnight gap and get back in.  Shorting TVIX at $2.80 (compared to the $2.76 exit point several days prior) didn't seem so impressive once I was in the position, but I felt fortunate not to have lost any ground, having just the day before witnessed prices (as previously mentioned) as low as $2.33.

Little did I know I was in for a bit of a ride - and by that I mean simply seeing TVIX do nothing but rise for the rest of the day and on Monday, June 27th, finally topping $3.60 as I cringed and tried to think about other things.  But that seems to have all come out in the wash now, along with the damage to the UVXY short I held alongside it the whole time (mentioned in the previous blog post.)  The shorthand summary of the two short positions:

I sold UVXY short on June 10th at $11.25, and still hold it short today, with a current trading price (as of today, July 5th) of around $9. ($8 was seen one trading day ago.)  UVXY went against me to a height of $17.12 on June 16th.

I sold my second round of TVIX short on June 24th at $2.80, with a trading price today of around $2.  This round of TVIX mocked me up at the $3.68 peak on June 27th, but I'm still standing, and in in the green, on both of these positions today.

My next post may detail some action taken on one or both of the shorts, but hopefully I'll be able to report what I consider to be more interesting news regarding some action taken on the SVXY shares - either disposal of them or at least profitable calls written against them.  Also, maybe I'll have something else to report in the options department, since the UVXY and TVIX shorts are just like side dishes to me, and I'd rather get something going on the main section of my plate.