Present your ticket to exit the ride

What to do when the market resembles a bunch of hills and valleys, and you feel like you're just one in a steady stream of confused, disoriented foot travelers trying not to get robbed along the wooded trail? One idea is to try to pick up the cash others didn't secure carefully while on their hurrying way, and hope you don't get pick-pocketed by those overtaking you who are faster and smarter.

Yesterday (Monday, September 19th), I jumped right in with a mixture of false courage and resolve not to look at the wound as I initiated attempts to capitalize on the fall of XIV that I continue to believe is coming, if not in large, long-range scale, then in a daily scale I can trade in and out of.

The trades detailed on the above daily log are not in sequential order, but each lot is listed along with any additional lot that was eventually closed together.  To make things simple (on myself; I do this for my mathematical sanity), I may "leg in" but I never "leg out."  I just close the trade when I feel I should or must.  Instances of the word "OUT" on the blue chart are five; I closed trades that many times, and in addition, had a UVXY trade not shown on the chart.  All positions were short sales.



The circle denotes the biggest mistake I made all day.  While feeling like a terrible trader (see the grand total for the day being just a bill for $83), I analyzed the day's mistakes and saw that while I booked a few losses, only one of those was really understandable and due to forces I couldn't anticipate quickly enough; the others were due to my own greed and denial (allowing losses to grow because I was tired of being stopped out for even, which happened several times, as shown by the one-digit result figures).  But the biggest mistake of all didn't involve a loss - it involved the failure to take what would have been a very rewarding gain.  To wit:

The encircled area shows the trades, entered shortly after noon and closed at 1:13PM.  My average basis on those was 34.63, and with 1600 shares at work, I closed the trade at 34.29 for a respectable profit of $522.  But I sat and actually watched the lower prices transpire and I did nothing, due to a desire for even bigger profits (understandable, but unwise to be too strongly influenced by); if I had it to do over again, I would have taken some kind of profit on the hike back up the reversal hill.  The low point was 33.58.  I would have booked a $1,680 gain.  Who can time exact bottoms, though?  Most are not so lucky.  Any point along that jagged climb back up would have benefited me: an exit price of 33.70 would have brought in $1,488; 33.80 would have served up $1,328 and 34 even would have given me roughly a thousand dollars.  I'm not sure what went through my head when I finally closed that out, but I know I wasn't very happy to see a positive $500 and a negative $500 mocking me like a pair of profit-eating bookends squeezing my collection of trades for the day into a thin, insubstantial, non-noteworthy gain/loss.

Moving on to the next day (today, September 20th as I write this), I rolled up my sleeves and got to work.  My plan was to keep these three things in mind: 1. Limit sharply any trades that might take off in the wrong direction from the outset, by pre-determining a damage-limiting stop (in my head and on paper. Whether I'd really adhere to that intention or not is an unknown); 2. Set stops to protect capital once a trade has moved a reasonable amount in the right direction (and I did that, and the stops executed an annoying number of times); and 3. Take sizeable profits and not lose them to unreasonable and unrealistic greed.  It is very hard for me to accept that I cannot make maximum profit on every trade, and I feel like someone stole both my lunch money and my lunch when I get out of a trade and think of those fictional "other people" (who exist mainly in my imagination) cheering and making way more money on their trades that started exactly the same as mine did, in the alternate reality world where great traders are cashing in while I got out too soon.

Five times in a row over the course of the long day I was stopped out for what amounted to be a nominal loss on the day before my next trades achieved profitable status.  An XIV short that went against me to the tune of a potential -$780 finally closed for a profit of $229.  A UVXY short that went against me as a painfully proposed -$680 finally came around and presented positive dollars, so I grabbed 980 of them.  (There were better profits to be had, and I let them tick by, but at least I grabbed a big handful before the dessert cart rolled away.)

Food metaphors come from the fact that I hardly ate while monitoring all of this, and eating is all I've done since, while typing this up.  Not detailed above are the uncertainty and second-guessing involved throughout managing these trades.  Lists make it look simple and charts make it look brief but the ever-changing ups and downs caused anguish at times. At the end of the day I was glad to present my final ticket and get off the ride (only to get on again tomorrow, most likely).

Back to VIX specials

This post may also be read at:  http://www.cboe.com/blogs/options-hub/2016/09/17/back-vix-specials

Summer didn't draw to a close without telling us it was doing so.  If any VIX-watchers were sleeping, they're awake now. Most of the summer seemed flat and long as a football field, and while that should've been easy, I made it difficult for myself by trying from July 19th onward to profit from something that simply wasn't happening just because I wished it and staked it out repeatedly:  The return of any kind of volatility or at least the end of the silent, somnolent, stubbornly-immobile VIX.

As a review I noted on this chart the nine times I've attempted to get tickets to the early screening of the VIX show; five of them have already been detailed in past blog entries so I'll describe them only briefly.  The remaining four will be explained.

At point 1 in the chart, I had wrongly closed my volatility shorts ten days prior (and they had been appreciating in value nicely and would have continued, had I not made that blunder) and I was finally determined, fueled by bitterness, to put that yellow blob on the chart and call a bottom to volatility and a top to the related leveraged inverse security.  The chart depicts XIV, but it could just as well show SVXY; since I traded both at different points and since they chart essentially the same way, I chose one to represent both.  The chart starts on July 19th and ends yesterday, September 13th (as I write this.)  It also depicts high trades for each day, so the ups and downs of each day are not shown.

See my previous two posts for details of trades 1-5.  I'll summarize them in broad terms here:  In trade 1 I shorted SVXY on July 29th and also bought calls intended to protect me from any rise the shares might experience.  The trade was intended to run for at least a couple of weeks but when there was a deep intraday dip just two trading days later, I closed the whole thing for a profit.

In trades 2 and 3 I shorted shares of SVXY, first on August 3rd at a price that immediately went against me, and then again near the peak of an intraday high on August 9th the likes of which wouldn't be seen again for half a month.  The peak-shorting mitigated the damage the original shorting had done; I got out the next day with considerably reduced red ink, yet I remember the day of August 10th as being a volatile trading day in which I could have gotten out flat, had I timed it better.  As a footnote, I did take the opposite side of the trade immediately after that by shorting UVXY the same day and bringing in a profit on it the following day.

In trade 4 I shorted SVXY with a matched protective call on August 19th and added to that position on August 23rd with more of the same in trade 5.  On August 26th I closed it all out for a respectable profit.

This brings us to trades 6 and forward which are the September trades I have not blogged about yet.   Trade 6 consists of a day trade on September 1st in which I simply shorted XIV and closed it a while later for just ten cents lower.  (Lunch + gas money was my takeaway.)  I must have lost my nerve.   It's a good thing I did, since VIX visited the 11 neighborhood the next day and XIV took a hike higher up the mountainside.

Trade 7 represents my first real success in echolocating VIX on the ocean floor.  On Friday September 2nd I shorted XIV at 38.57 (see chart below.)  Within a few days the trade had moved against me to an apex of XIV touching 40.59 on September 7th.  At 800 shares, this put me behind by about $1,600.

 

I didn't even think about booking that, though; in fact, I looked the other way and forgot about it until I was awoken on Friday morning by my spouse literally holding a glowing chart over my face.  Our actual first conversation of the day was a whispered "VIX futures are up over three percent."  "Thirty percent?"  "No, three percent."  "Oh, OK, I'd better get up now."  Late in the day on Friday, September 9th, I thought I should harvest the fruits of the quick-growing VIX tree and cash in that short as such:

As you can see on the chart. 33.93 was the final print of the day and it chafes my brain to think that I could have closed the trade a little while later for an oversized dollar lower, but I must move forward and try not to dwell on it, because no pity parties are held for traders whining, "Coulda, shoulda, woulda."

Trades 8 and 9 bring us up to the current week.  See the detail and chart below for my XIV trades; the adjoining chart depicts same-day UVXY.  On September 12th I sold XIV short at 34.91; closed it the next day at 33.56.  A while later I believed I had made a mistake to close the short, so I re-shorted at 32.26.  Chop ensued for the next few hours so I closed it at 32.15.

With UVXY up more than 29% for the day on September 13th, I thought it might be safe to take some of the end pieces off that loaf of bread without being caught.  Sure enough, had I held that short through the present (Wednesday afternoon, September 14th as I write this), nearly two dollars have fallen off UVXY, but I didn't want to risk an overnight unknown so I bought it back just a few seconds before the close (oops - didn't mean to wait quite that long - timestamp: 03:59:47) for 24.58.  Detail:

Well, I started by saying that summer is over, but of course, it definitely isn't.  My favorite season won't be over until the very last day, which, by the calendar, is a week away.  Wait - did I say I like summer best?  It's VIX season I truly look forward to.  Is it here yet?  Can we start?  Can we invent a new season between summer and fall?   I'll be back soon with some tales of sightings of the wild VIX spikes, I hope.  Until then, enjoy the rest of your summer and the start of your VIX-er.