Two scoops, please. That's what UVXYTrader (@michaellistman) said this morning when he got a scoop of put premium and a scoop of call premium on his ice cream cone. With UVXY trading at approximately 21.90, he brought in 86 cents of premium per contract on some puts for the 21 strike expiring this Friday and 1.77 per contract on the associated calls, all of which he sold short. Let's see what happens for the rest of the week and how this trade comes to a close through some method or another. 2.63 (or $263 considering the type of contract these were) was deposited into his account, per contract (of which the quantity is unknown or let's say, it's not going to be discussed here, at any rate.)
Later in the week we will discuss the eventual resolution of this contract, wishing the best possible outcome for UVXYTrader.
Break evens are 18.37 and 23.63
ReplyDeleteIf it finishes the week above I simply roll the $21 Call and sell another $21 Put for next week which carries forward the increased intrinsic and collects more premium, which in turn expands the break even points.
A defending line has been set at $28 for this position (~20% above B/E) where I will purchase shares to become delta neutral. Will keep rolling the Calls as long as it remains above $28. As soon as it drops back below $28 I'll take the shares off (but whipsawing is a risk so often I'll ladder on my hedge and ladder off i.e. 33% at $27, 33% at $28, 33% at $29)
I do this trade every week
When you say "roll the $21 call," do you mean sell calls for the following week? Just as you'll be selling puts for the following week?
ReplyDeleteI would only need to roll the ITM option and let the other expire worthless. Then I would sell to open a new contract to replace the expired one. As of this second extrinsic premiums at $21 are at .95 (this week's has already dropped to .20)
ReplyDeleteSo I can keep this trade rolling week to week until spot drops below my strikes (pinning is winning) and then resetablish lower since UVXY goes down.
Never defended these today so...
ReplyDeleteJust rolled this out to Sep18 and collected another .75 for each leg making my break evens now $16.87 and $25.13
Closed this position today for a net gain of 2.08 per lot
ReplyDeleteWorst margin requirement for this got to $3250 per lot so worst ROI calc is .064% over 3 weeks which is above my weekly target.
Rinse and repeat... selling $18 Straddles for Sep25