Prudent and Rational

This post may also be read at: http://www.cboe.com/blogs/options-hub/2017/12/26/prudent-and-rational

Going back to December 4th, I left off in the middle of the day and promised to be back soon and detail the trading for the remainder of the day.  Though time has passed, has SVXY been doing anything different?  Have stocks been doing anything other than more of the same (new all-time highs) and has VIX been doing anything other than pedal like a bicycle between 11 and 9 and back again like the rising and setting of the sun, reliable and repetitive?  VIX nearly reaching 12 (a big spike, these days) on December 4th enabled me to have a little fun in the afternoon before bringing in all my chips and doing a final tally.

Follow the numbered steps and note the timing, down to the minute, that was required to bring in a few dollars on this ship-in-a-bottle.

 1. At 11:25 in the morning, I sold short a modest mess of SVXY at the price of 114.05.

2. At 1:13 and 32 seconds I bought calls for the 115 strike, December 8th expiration, for 2.75 each in a quantity to match the aforementioned mess plus the disaster-sized portion I planned to sell short immediately after purchasing these.

3. At 1:13 and 58 seconds (pretty close to immediately after the above step), I sold short 2.5 times the quantity I had originally sold short, this time at the price of 115.38.  If you are good at algebra, and if you knew my final basis, you could probably compute the quantities.  Anyway, I now had a landfill-sized mass of short SVXY at an average price per share of 115.00 even.

4. Way before the end of the day, at 2:45 and 48 seconds, I sold to close the calls for 1.94 each or translated into the multiplier of 100, that's $194 against my $275 buying price, or a loss of $81 per contract.

5. Nineteen seconds later at 2:46:07, I covered all shares at 113.75, or a $1.25 profit per share, coming out to $125 profit per block of 100 shares.  My net profit equaled $44 per block of 100 shares.

Why did I do any of the above?  Well, obviously, I was trying to capitalize on some downtrend in SVXY when I sold short mid-morning.  When, an hour later, it appeared obvious that I had mis-timed my short, I decided to get trader's revenge by doubling (plus) down.  But this would be an unwieldy amount of short shares. To limit risk I bought calls so that, should disaster strike and SVXY rise to the moon every day the rest of the week without stopping, I could cover at the same price I had sold shares short by exercising the calls.  My cost would be the total cost of buying the calls.  So, I bought calls at the 115 strike and then rolled up sleeves (kidding; I was working so fast there was no time to roll up sleeves) and shorted the appropriate additional number of shares less than 30 seconds later.  Funnily, without trying to achieve this down to the penny, when I sold the new shares at 115.38, this averaged out with my original shares to produce a new basis of exactly 115.00.

Now I had a small country's GDP worth of SVXY short and protective calls to match that risk.

After a nice trip down the stairs around 2PM, and not being clairvoyant, I decided to exit the whole set of obligations (referring to the shorts) and expensive privileges (referring to the calls). It looked like I could sneak out without anyone realizing I had cut a city-block corner by going in one revolving door and out the other and in between, had been lucky enough to see cash sticking out of the lobby trash can.  I played with fire and escaped being burned and decide to get out while the gettin' was... well, possible.

Of course, seeing the rest of the day unfold made me wish I had left the shares uncovered a little while longer; outrageous victory would have been mine.  But notice that hike up right before the tumble down the mountainside right after I exited the position:  Could I have withstood the red ink on those shares, had I dispensed with the calls and just held the shares naked?  With SVXY touching 114 and a half compared to my 115 basis, and having just taken a calculated loss by ditching the calls, I'd say NO.  Since I had booked an $81 per contract loss on the calls, I couldn't close my shorts for less than a 0.81 difference, or I'd go from gain to even to loss faster than a one-minute candlestick can form.  114.50 from a 115.00 starting point would put the whole deal solidly into money-losing territory, and how could I know how much higher SVXY would climb?  This illustrates the necessity, in the prudent and rational side of my mind anyway, of being disciplined enough to close the whole trade out at once, or at the very least, watch it by the second if choosing to go naked-and-reckless.

With the calls sold at a loss and the shares covered at a gain bigger than the call loss, I declared the day a success, resolving that I wouldn't play with dangerous quantities of volatile securities again, at least until the next day.

Click the Crypto to profit

This post may also be read at: http://www.cboe.com/blogs/options-hub/2017/12/06/clicking-on-cryptocurrencies

I'm not normally a multitasker, but let me tell you, when procrastinating, I can really do it.  Last night, while doing some boring but necessary tasks on the right screen of my desktop and wanting some mental stimulation on the left screen to liven up my evening, I logged into my gemini.com account and starting clicking around.  First of all, anyone wanting to know how easy it is to trade bitcoin or ether may be assured that it could not be more streamlined.  I believe my cat could do it.  Hey - wait!  While I was in the kitchen, who sold for that price?!?  Just kidding.  The truth is that some crumbs must have been present on the keyboard recently and my dog "helped" by cleaning up and at the same time, adding a bunch of new people on Twitter.  (Joke there, too, about the unsavory Twitter contacts - but it could happen!)  Keep pets away from your keyboard to ensure you are the one making the trades.

Everyone loves Bitcoin, but it so happens I wanted to vanish into the ether last night.  Let me explain how I set my account up: Online, by filling out some fields and providing some proof of identity, and it took just a few minutes - I was shocked at how fast I was up and running.  As to how I funded it: The simplest way you can imagine, by transferring (via ACH bank transfer, although you can also wire) funds from my checking account.  In my case, $400 cash was sitting there (more like $402 and some change after having done some trading earlier in the fall).

Here is what I did last night as an exercise, challenging myself to simply buy, sell, buy, sell, and bring my account up by at least $1 each time.  Of course, the greater purpose everyone (including myself) would have in mind would be to trade more or less frequently than I did, pay more attention to entries and exits, and maybe increase the size of trades in order to get better returns for the effort.  For my purposes last night, though, I wanted to pay the least amount of attention possible to my left screen while I did other things I had to do, and demonstrate to myself that in a semi-automated fashion, I could pull a few dollars out of thin air.

Let's get right to the buys and sells:

To simplify things greatly so we don't get bogged down in math, the fees for these trades were running about $1.01 apiece, so my goal was to set my sell prices $2 or so higher from my buying price, to allow for the fee and some profit.  Then I'd turn around and set a limit order to buy at a few dollars lower than where I had sold - again, to allow for a fee and to get in lower.  "Buy low, sell high."

Of course, after buying, if I saw nice high prices, I would go ahead and get one instantly, rather than set a limit order and walk away.  Previously I had used market orders exclusively, but last night I learned the advantages of limit orders.  Currency moves fast, and it's not inordinately risky to examine the current bid/ask pool and set a limit for something that seems within reason at the moment.  Very frequently the fill comes sooner than you'd think.  Unless unloading a position at a certain juncture in time (like, immediately) is critical, setting a limit order is a valid/convenient method.

As you can see in the detail above, I raised my account in steady $1 increments by hitting the sell button only four times most often using my simple formula of , "What did I buy for?  Add $2 and set a limit order to sell for that."

Gemini allows users to download spreadsheet data and here is a sample showing the above detail in a different format:

One transaction appears different than the others and it's only because it was split into two; this must have been some kind of internal accounting and was visible only in the xls data and not on the user end as it does not affect anything I do.  In viewing the transactions, you can see that whether I chose to end in cash or in ETH, my value increased:  Greater cash value, greater ether balance.

If you are interested to see what the trading screen looks like, I have captured one; see below.  I believe you may have to click to expand it, since it's too large to display in full detail in this column.

In this screen capture you can see:  My open limit order at the very bottom, and if you look at the trades competing to execute you'll see mine at the next-to-bottom line.  On the right is a series of alerts informing me of current status of my account and open and executed or cancelled (if I were to cancel one) trades.  The tabs at the top confer the ability to transfer funds (linking a checking account makes it easy to electronically transfer or wire money in or out), and obviously to buy and sell.  Upon clicking buy or sell, the pull-down bar offers a few options - choose one and you're good to go.  In this case I was using buy ETH with USD and sell ETH for USD.

I decided to leave my account in cash overnight, since I didn't want to take the chance on ETH declining while I held it.  I think I could have sat up all night and traded, but people have to sleep some time.  I'm not putting down people who play games, but I simply cannot relate to wasting my time collecting the bananas or blowing up the imaginary island.  I witnessed (in the reflection I could not avoid seeing it) the person one row ahead of me on the train the other day playing solitaire or some other move-the-cards game for the entire 40-minute ride.  If I am going to be clicking and scrolling, I want the prize to be some money.  I find great motivation in the prospect of advancing myself financially, especially when I can do it with nothing besides my brain and a display.

For more detail on the trading platform, see this shot of a trade I placed this morning:  A limit order to buy ether using the total amount of USD in my account (this is the way I placed each buy order) at a price no higher than 443.77 (thus, it's called a "limit," since that's the top limit of what I agree to pay.)

I outlined my bid in yellow.  I placed the bid under the current, but just a penny over the next guy in line behind him.  Very soon it was filled, and note that while I had been working with a quantity of ether in the .87 to .88 range last night, I now have 0.91358172 ETH.  I'm currently waiting on a sell order to bring my account up yet higher.  Then I'll set a limit order to buy lower.

While these amounts gained are small, my point in performing this exercise was to make sure I'm well familiar with the platform (and there's nothing to it, so the warm-up is almost instant), experiment with low-effort strategies to generate return just by riding the waves of bid/ask prices, and gain insights into buying and selling habits that may enable me to move larger amounts around for greater gain.

Don't trip over the dip

This post may also be read at: http://www.cboe.com/blogs/options-hub/2017/12/06/don't-trip-over-the-dip

Not sure what everyone else was thinking/doing/cursing about during Friday, December first's Big Dipper, but it just so happened that I had set up something I expected to be far less exciting than it turned out to be.  On what I thought was just another regular, normal, tired-bull-run morning where every day is approximately exactly like the one before, I had paid for expensive insurance so that I could play a little game and take my chances on picking up some goods.  I paid admission so I could spin the wheel, in other words.  Sure, I could have done it without paying, but I wanted a guaranteed exit, should the game go south.  I hoped I would not have to use my exit ticket, and that I could sell it to someone else.  Actually, my real hope was that the ticket would burn to wispy ashes and float away in the wind, with my shares rolling so far downhill that no one remembered why they liked that security, ever, in the first place.

As pictured, on what seemed like a do-nothing, experience-no-fun regular old day, I sold shares of SVXY short at 9:45AM at the price of $111.10, and then at 9:50AM bought the appropriate number of December 8th 111 strike calls to protect those short shares at a price of $3.80 each.  This means I spent $380 for each block of 100 shares of SVXY sold short.  The worst outcome to me, after a week, would be that I'd lose the full value of the calls, exercising them to cover the shares at just ten cents less than I had shorted them for, and my profit on the shares would only offset my loss by $10 per contract.

Imagine the expression on my face when returning from the bathroom or somewhere to see the purple bars.  Although watching them intently and intensely, I didn't catch the ideal profit.  I had to make a judgment call on whether the move might continue or might evaporate completely, and I exited at a place that really, only I could rightly criticize.  This is because I criticize myself irrationally at times; I wish I caught the bigger profit, I wish I got the lowest tick, I wish I profited x1000.  But...  for a trade intended to last a week, that could have lost $370 per contract, it wasn't such a bad way to spend an hour.  I bought SVXY to cover at 104.57 and then recovered $2.00 per contract by unloading the calls on some willing buyer. Tallying it up, $180 was lost on each contract and $653 gain was booked on each lot of 100 shares.  Set them against each other and it came out to +$473 per group of 100 shares shorted.

Later in the day (see inset) I snacked on some pretzel stix... oops, I mean TVIX, by shorting at 7.94, then covering at 7.88, and later shorting again at 8.00 and covering during the last minute of the regular trading session at 7.79.

Traders don't say "TGIF," they say "TGIM" and like a kid asking "Are we there yet?" I wasted time reading tweets and drinking coffee until the market opened today, December 4th.
 
Second trading day of December, and everything feels funny.  It's the perfect kind of day to go hunting for some money. Okay, I promise - no more rhymes.  They're way more fun to write than read.  Let's go ahead and contrast prudent caution / reckless greed.

Discarding and ignoring all the online, news story, and water cooler (if I ever got near a water cooler) chatter I'm sure took place over the weekend (let's consider some of that to be coffee pot chatter, as I chattered to myself in my own mind near my own coffee pot), I decided to do a little intraday top-calling.  Let the charts tell the story:

Not one to wait and watch for too long, I took a clean shot at the tires of the bandwagon that all the Twitter bulls were boasting about so hard that their coat buttons popped and put each other's eye out.  It was as if they had accomplished this gap up by their own cocksureness; to listen to them was to need to clutch a bucket.

SVXY short from 114.66 hit my account in a quantity I really shouldn't be dealing.  So I bought the other side by plunking down $266 per lot of 100 shares in the form of December 8th 114 calls. This way SVXY could go parabolic and I'd know my maximum possible loss, which would be $2.66 per contract minus $0.66 profit on the short if I ended up exercising those calls to buy to cover, or $2.00 per contract translating to $200 per lot of 100 shares. Of course, I hoped I'd slink my way out of this one, too.  Well - soon enough, some action got started and I counseled myself into admitting to myself that a profit right away is better than a possible loss situation every day from now until Friday.  Computing that I could book a nice profit by closing the whole deal out immediately, I thought about that but instead decided to get my unwanted chaperone out of the way by paying him to leave and go bother someone else.  Taking only a $66 loss per contract, I disposed of the calls for $2.00 each.  Now I could let my short shares run.  Tell me: Wouldn't you want to, having shorts and looking at a chart like that?

Well, having forgotten that I had saved the above graphic, I made a new one just now with information repeated, except you can see the trajectory of SVXY for the remainder of the day and the ugliness of the chart with the yellow stop-set line gone (as, once again, I returned from momentary absence and experienced outrage to see that my stop had hit.)

Note how nice and neat that turned out (and I didn't plan it that way, but orders were filled for slightly better than my limits.)  Having lost $0.66 per contract on the 114 calls, I knew I could take a profit as small as $0.66 from my shorting start point of $114.66 and break even, so I simply set my stop on quote for $114, knowing it would execute for some price a few cents above or (probably not) below that trigger.

In hindsight I wish I had taken the fat profit staring back at me as I set the stop.  But none of us know which way the ticks are going to go, and this time they made somebody else's dream come true.  If you think I just sighed and said, "Oh well..."  Well, not quite.  "Trader's Revenge" for me means looking behind door 2.  The next post will detail the remainder of the afternoon of Monday, December 4th.

Turn Your Collar Inside-Out

This post may also be read at: http://www.cboe.com/blogs/options-hub/2017/09/14/turn-your-collar-inside-out

Ever make a sandwich so big and poorly constructed that the second you pick it up, the insides propel themselves out and all you're left with is a few pieces of dry toast?  Me neither, but I can envision it happening.  Keep stacking the vegetables without regard to sound principles of sandwich engineering and you may end up with a floor salad.  Well, I set out to make a short sandwich (reverse collar, you could also call it) on Tuesday, September 12th, hoping for the best, as always, but not preparing all that well for the worst.

Around 3:50 PM, I noted that SVXY had made a quick and ferocious climb during just three days, and I thought I'd take a chance on a little roll back down the hill, the way manual transmission cars tend to do at red lights when traffic is stacked up immediately behind them.  I had no brilliant thesis or compelling can't-lose calculation on my side; I simply sized it up with my bare eyes and took a chance by shorting some shares.  Yet I know that the financial winds produced by Mr. Market can be foul indeed, and I didn't want to be stuck on the wrong side of Party Town during the ongoing public festivities called "Market Rises Forever."  I thought I'd better buy myself an expensive emergency-use-only ticket out.

Searching around for protective calls proved unappealing as SVXY continued to climb for the last few minutes of the day.  I placed an order; no one liked it and it didn't go through; I withdrew the offer and made the uneasy decision to wait until the next day.  There ended my trading day, with SVXY short in my account from 82.55 but the rest of the world trading it at 82.73 (and even higher after the close.)

Next day rolls around and SVXY just keeps climbing.  VIX keeps sinking to the middle of the ten range and sits comfortably there.  Indexes can't decide what to do but SVXY keeps rising, and my blood pressure goes up a little with it.  I still haven't bought the protective calls by mid-day, so I resolved that I'd do so, just after shorting a little more and therefore raising my average shorting price.  At 10:39 on Wednesday morning, September 13th, I shorted some more from 84.11, and for a few minutes it looked like I had made a smart move.  But wouldn't you know it - SVXY rose higher and when it touched 85.00 even, I made a move to double my exposure using the justification that I had not yet bought the protective calls and might as well get the whole thing in place so I could begin the process of learning whether my trade had a chance or not.

At 12.52 PM I shorted from 84.95 to bring my shorting basis now to 84.01.  Though I would have rather waited for better call prices, I thought I should be responsible and go ahead and buy my protective calls.  I like the idea of maximum short profits but I don't like the idea of unlimited damage to my account via naked short shares in a quantity I might be completely incapable of covering.  So I put up the cash to buy an appropriate number of calls for Friday, September 15th for the 84 strike and paid a $1.59 contract price for each one of them (that's $159.00 per contract.)

Now I know a worst-case scenario for this short:  If Friday comes and SVXY has continued to climb, I can exercise my calls and buy to cover for the same price from which I shorted.  The only cost to me will be what I paid for the calls.

To break even at expiration, I need SVXY to fall below my basis by at least $1.59 (I'm ignoring the extra penny right now, pretending I shorted from $84.  I'm also ignoring any commissions so this would be off by several dollars here and there.  Let's keep it simple, though.)  All right, let's be precise, although ignoring commissions.   I shorted from $84.01 and if I want to recoup every last penny spent on those calls, I can just let them expire worthless and buy SVXY to cover at a price $1.59 (the price paid for the calls) lower than my shorting price, which comes out to be 82.42.  If it falls even lower before I close the short, then I net a profit.  If it falls below my shorting price, but just by some amount less than $1.59, then I recover some of the cost of what I paid for the calls.  But the price of the calls is the maximum loss I'll have to realize.  That's where I stand now (as I write this on Wednesday, September 13th.)  I have something else up my sleeve, but let's get to that tomorrow.  Before I go, though, let's talk about whether my long calls will be worth the price paid.  When I shorted SVXY, I opened myself up to unlimited risk.  If, on options expiration day, SVXY ends higher than a certain price, which can be determined via this calculation: the price from which I shorted PLUS the price paid for my calls (or 84.01 plus 1.59 which equals 85.60), then it will turn out to be worth the money, at least, assuming I would not want to keep the short open past that day.  Because that cost would be the same as if I had never bought the calls, yet decided to cash in the short (at 85.60) and take a loss of exactly the same amount per share (1.59) as what it turns out I did, instead, pay for the calls.  Every penny SVXY ticks up costs me more money, but at least now I know a maximum cost to me, assuming I exercise my calls before expiration.  Had I not bought those calls, the sky would be the limit as far as potential damage to my account.  Let's adjourn until tomorrow (Thursday), now.

**MINOR UPDATE Captain's Log, star date Sept. 13th 4:30 PM**  I could not resist the tempting profits on the long calls and kept a small fraction of them, selling the majority of them for 2.10, when I had bought them for 1.59, or a profit of 0.51 per contract.  The intent is to wait for a lower entry point and re-buy them... OR NOT.  (insert unsettling laughter sound here, echoing and distorted.)

Writing on Thursday, September 14th during the pre-market hours, I can now report that I bought shares to cover my short shares in a rag-tag assortment of lots, some of them at my preferred price and some not even near it (when am I going to learn to place my limit orders with more generous, um... limits?) and that, of course, is because I had to cancel a partially filled order and put it through again for a profitable, but not nearly as profitable, price.  The 84.01 shorting price turned into cover prices of 83.68 and 83.94.

 

  
Now, darned tootin' glad that I sold most of the calls yesterday, I turn my attention to selling the remainder of the calls at my first possible convenience and/or at the moment I sense that the price of those calls won't keep going up.  Options often go from valuable at varying prices to not valuable at all before expiration, as everyone knows, so my task will be to monitor SVXY which is influenced by the VIX which has something to do with the party-forever market-never-stumbles culture that SPX currently resides within.

As you can see in the pink ink above, between one paragraph and the next, I was able to get rid of the last contracts, and for 1.65.  So, having bought at 1.59 and sold for 2.10 and 1.65, with profits also made on the short shares, I wrap up this trade without complaining.  It was meant to be so much more, though.  Why does the title mention a collar?  I had envisioned the short going my way immediately at which time I would sell out-of-the-money puts.  Paying myself back for the purchased calls is the idea; I've done it before (see previous blog posts) but this time I didn't even get to pop my collar.

Everything went against me multiple times, but I was able to get out and avoid plenty of damage I signed on the line for.  I started with a naked short, and even held it overnight, which of course exposes the holder to unlimited risk.  Then I bought calls with a known possible total loss of $159 per contract.  Instead, I ended up making $41 per contract, and $14.75 per each 100 shares of the short, so added together, I made $55.75 per each block of 100 shares of SVXY shorted.  The security went from 82.55 at the outset of this trade to 85.04 at 9:48 AM today, September 14th when I closed the last of the trade out.  How did I profit from a short of SVXY when it only went up while my trade was open?

Careful handling of all the dangerous moving parts, that's how.  And I'm glad I was able to do it.  Until next time...

Outcome: Net Fun

This post may also be read at: http://www.cboe.com/blogs/options-hub/2017/04/29/outcome-net-fun

Shorting UVXY is sort of like making pancakes and flipping them in the air and catching them with the pan.  You can entertain yourself and others like that for a while, and you just may accumulate a large stack of perfectly browned piping-hot pancakes, but sooner or later some raw batter is going to hit the kitchen floor, and that is not much fun.  And what if everyone eats up all your pancakes in the meantime, and you're stuck with nothing but a kitchen-floor disaster? Well, on Thursday, April 20th, I felt the ever-present hunger for a little short UVXY profit, so I shorted some shares.  But only with the keen awareness that I was lending out borrowed shares backed up by capital I really did not want to cut into and hand over in an "oops - bad timing" debacle.  It could also be likened to writing a check as a security deposit, not wanting that [huge] check to be cashed - because what if the damages might turn out to exceed the amount I have in the bank?  Sky's the limit with UVXY and I wanted to be along for the ride down the slide, but not for anything involving high-and-rising share price heights.

I could not or did not want to watch every tick and possibly experience the sickening sight of a huge and maybe nearly-immediate loss in value of my short shares.  So instead I paid a fee to set a limit on the amount of risk I'd be exposed to and I accepted a time limit within the fee's contract.  My fee was 0.65 per April 21st (the very next day) 19.50 strike call contract and I bought the appropriate number of contracts to go with my short shares.  I had shorted at 19.53, so the plan was:  Should I choose to exercise those calls, I'd be buying shares to cover at 19.50, making a $0.03 per share profit on my short, bring my loss at that point to 0.62, or $62 per block of 100 shares.  The hoped-for scenario at this point, conversely, was that UVXY would drop enough from my shorting price of 19.53 to pay me back for the 0.65 cost, so that I could buy the calls back for some small recoupment or even see them expire worthless, but I'd make so much when closing the short that I'd find the 0.65 to be worth the sleep-at-night value it conferred.

I wanted to reduce that cost, though, by selling some puts, even though that action would then limit the profit I could make on the above-described short with protective call.  I priced out puts tick by tick (see, there's no escaping watching the ticks, but at least I had breathing room now) but didn't like the fact that I'd still be locking in a loss, even though it would be a maximum worst-case loss.  Puts were going for prices lower than what I had paid for the call, so I couldn't pay myself back fully.  To be a hair-splitter, I had a 3-cent head start on the short, so I could accept a price 3 cents lower on the puts and still pay myself back.

It turns out that a series of nice red ticks brought the put prices down to where I was able to sell the same expiration puts on the 19 strike for 0.63 (see first orange arrow on chart), nearly the same as the price I paid for the calls.

At this point I could ignore the whole trade and check in late on Friday to find out whether it was a zero or the full profit or something in between.  Zero would materialize if UVXY would end higher than my call strike.  I'd exercise the calls, buy to cover for a 0.03 profit per share, and I'd have the full put premium received of 0.63 to set against the 0.65 I had paid for the redeemed calls, and you can see that this would come out to completely flat.

Something in between would materialize if UVXY would end between my strikes.  I'd be able to take some profit on the short, and premiums would offset each other (as described above, with the call expiring worthless against the full premium retained on the put).

Maximum profit would occur with UVXY ending below the put strike.  I'd lose all of the 0.65 I spent on calls, I'd be assigned on the puts, keeping the premium of 0.63 received, and at the strike price of 19.00, my short profit would be 0.53 per share.  This would net out to 0.51 per share, or $51 per block of 100 shares.  I was all set, though, with this can't-lose scenario and could sit back and do nothing.

But wouldn't you know I went and tinkered with this, taking vital parts of the machinery apart, early Friday morning.  UVXY opened so high and rose so much higher (see second yellow arrow on chart) that within seven minutes of the market open I bought back the puts to close for 0.20, envisioning a reversal of this hopefully-aberration-like open and then unfettered short share profits beyond my wildest dreams.   It seemed like a good move - for a little while.  Most of my short put premium had been locked up as a booked gain, and nothing was holding me back from limitless profits to the downside on UVXY.  But as UVXY zig-zagged higher for hours, I realized my mistake.  I had gone from max-loss-zero to a max-loss equivalent to the premium I chose to give back in my impetuous buy-to-close.  Should UVXY now rise above my call strike, I'd be able to buy to cover safely and essentially flat, but I'd be out the 0.65 cost of the calls with only the 0.43 profit made on the puts to offset it, or a 0.22 per contract/$22 per block of 100 shares loss.  Prices under my [no longer existent] put strike were looking unlikely by midday, and I kicked myself for turning my can't-lose trade into a might-lose-moderately trade without thinking it through.

I started looking for ways to bring in whatever premium could be recovered from the call side.  I already had a maximum loss set out at this point and while I couldn't likely recreate the no-loss scenario, I could manage the same max-possible-loss by changing the criteria for the day's outcome.  And the outcome loomed close, with only an hour and some minutes left in the day.

At 2:46 PM, I sold the calls for just 0.06 against the 0.65 I had paid.  That doesn't seem worth much, but I used that in determining the price for my stop-on-quote.  In order to break even-ish, I set the stop for my short UVXY shares at 19.33, while they were trading at around 19.12.  Within a few minutes my stop almost hit (see chart below.)  I believe it was within 2 cents, and you can deduce my mental state when I tell you that the person looking over my shoulder suggested that I "go and do something else for a while."

Soon, enough, a cascade of tumbling UVXY prices appeared like Niagara Falls, so - finding myself suddenly at the bottom of the falls - I climbed aboard the first boat I could see through the mist without stopping to read the name first, and grabbed the 18.98 bid to get rid of my short shares and put this story in the history books.  You can see the price bounce that ensued (back over 19.25 for a second), making me glad I hadn't waited and analyzed and computed even one darned digit before hitting "market" to unload that short.  To recap:  My known-max-loss went to no-loss, then to a different known-max-loss, and ended up at a profit not too far from the original max profit I had computed.  With an ultimate cost of 0.59 on the calls, 0.43 profit on the puts, and 0.55 profit on the shares netting out to +0.39 overall, I consider this a two-day adventure I'd be happy to have again, at least after I shake the 2-cents-from-stop experience (better than triggering-stop-in-one-tick) out of my brain and try to remember only the good parts and the fun.

Short some shares and call me in the morning

This may also be read at: http://www.cboe.com/blogs/options-hub/2017/04/21/short-some-shares-and-call-me-in-the-morning

Who wants to buy high and sell low?  Why would anyone buy calls before the closing bell and sell them to someone for half price the next morning when the opening bell rings?  When would anyone feel okay about buying for 88 cents and then selling for 45?  Answer: When the calls are just a wrapper, a box designed to keep something else safe while in transit, like a shoe box protects the merchandise on the delivery truck so that your purchase isn't thrown on the porch one shoe at a time by the people in the step van.  Of course, that shoe box may convey to you an unflattering, ill-fitting pair of shoes you don't like or aren't ultimately able to use, but it may surround and present you with just the thing you were looking for; you may have something valuable in your hands that needed some insuring.

On Wednesday, April 19th just before the close, I decided to take a short position in UVXY.  Because I didn't want to spend a lot of time or put a lot of money at risk waiting to see if this short would produce gains for me, I decided I would limit the losses a wrong-way short might put me in line for and I bought calls at-the-money expiring just two days later.  The shares were shorted at the price of $20.08, and I bought one 20 strike call for Friday's expiration at the option price of 0.88 or $88 for every hundred shares of stock.  At the very worst, if UVXY would rise and never come back down to refuel, I'd be able to exercise my calls on Friday and turn that into a buy-to-cover at the price of 20.00, which would actually net me an 8-cent profit per share.  So it would be an expensive shorting venture, bringing in only $8 per block of 100 shares on the short and paying $88 to make sure I wouldn't have to buy the short back at some damaging, unpleasant or downright scary price which could be any price, really, when you're thinking about UVXY.

So, of course I didn't really want to pay that much, and I had in mind the idea of selling puts at the next strike down, so that I'd have the chance to bring in some profit on the short shares, but I'd also be able to pay myself back for the calls I had just bought.  Problem:  19.50 strike puts were going for prices not high enough to fully pay myself back, so I thought I'd wait until the morning and see if better prices could be found then.  So I kept these short shares with only protective calls to accompany them overnight.

In the morning, UVXY had dropped so sharply that I abandoned the idea of selling puts and instead covered my shares at 19.40 for a 68-cent per share profit, or $68 per block of 100 shares, and then I disposed of the calls by selling them to whoever shelled out 0.45 per contract, and against the 0.88 I had paid, that was 0.43 I recovered or $43 per contract.  Setting my final cost of $45 per contract against the $68 per block of 100 shares I brought in, that ended up being $23 per block of 100 shares on this short, and I was pretty happy with that.  Considering that the trade was opened a few minutes before closing time and in the can a few minutes after opening time, that's not bad for a coffee and ding-ding (closing bell and opening bell) trade.

Rewrap and return to the store

This post may also be read at: http://www.cboe.com/blogs/options-hub/2017/04/20/rewrap-and-return-to-the-store

Before the paint was really dry I started tinkering with the reverse collar set up yesterday.  The first thing I did, acting upon a suspicion (you could call it a wish) that the VIX would sift downward the next day (which is today, as I write this), is that I closed the short put.  To recap the spread, it was as such, all of it opened yesterday, April 18th:

Shares of UVXY sold short at 19.48
Put for the April 21st expiration, 19.00 strike, sold short for 0.62
Call for the April 21st expiration, 19.50 strike, bought for 0.98

Soon after setting this up, I realized that I was taking on a risk of a $38 per contract loss and stood to profit only $12 per contract, at best.  Then it went against me, and then in my favor, and I'm not sure how soon or how many times.  I was too busy calculating exit strategies and the landscape changed several times in between checking in on it.

Late in the day I decided I would buy back the put at a loss.  I would have been able to do so for a gain, just minutes earlier, but as I watched and schemed it turned into a loss, and I did it anyway.  Why?  I decided to raise my risk so that I could raise my potential reward.  As it stood, my risk was limited to a total of $380, but removing the short puts from the strategy would change that risk to the total of the loss I might realize on the shares (just two cents per share) and the premium paid for the calls, which was 0.98 plus any loss taken on the closing of the short puts.  I closed the puts for 0.79, after having opened them for 0.62, booking a loss of 0.18 or $18 per contract.  My total maximum worst-case loss would now be 1.18 or $118 per contract.

Then this morning, I saw that I was fortunate enough not to be looking at potential losses; instead I caught a glimpse of some nice unbooked gains.  As seen in the chart, UVXY was well into the 18s.  I saw that I could close both my shares and my calls and take a profit of about $40 per contract, but being greedy, I calculated stops to set instead.  So I did the following:  Sold the calls which I had purchased for 0.98 to someone willing to pay 0.27, which increased my total loss (adding in the put loss from yesterday) to $89 per contract.  My goal now was to close my UVXY short shares at any price that would pay me back for that loss, or better.

Remember that I had shorted UVXY at 19.48, and it was now trading in the 18.20s.  The yellow line indicates a stop I set to buy to cover at 18.56.   This was intended to net me a $92 (per block of 100 shares) profit so I could wrap all this up and put it behind me in the learning books.

 Then, as often happens, one spike, and I mean ONE one-minute candle (see above) conspired to take out my stop and I lost the whole deal.  My UVXY short shares were now bought back at 18.58 (you should have heard the series of ring-a-dings as attempts were made to get me out as requested) and my profit on the short shares came in a 0.90 per share, or $90.00 per block of 100 shares.   So I ended up essentially flat on this venture, which is better than the way it could have ended.  That sure was a lot of fancy footwork to close out such a multi-faceted gem that was intended to run as long as three days and could have produced a range of outcomes, only to back out within one day and wipe the slate clean.

Taking the unmarked trail

This post may also be read at: http://www.cboe.com/blogs/options-hub/2017/04/19/taking-the-unmarked-trail

Every once in a while I have to try something new, and that means choosing something different from the menu and forgoing that same old tried-and-true sandwich.  What sandwich am I talking about?  My own trademarked "strangle sandwich," which is no one's favorite but my own.  It's a doozy; it's not for all tastes, and it might just fail and make you sick (and sorry you tried it.)  Let me tell you what it is before I tell you what I opted for instead, today:

I like premium, so I can't resist the appeal of the classic short strangle.  But who wants to lose on any spread?  This is how I have managed certain strangles in the past (and by "certain," I mean those that appeared they were going to lose me money.  I don't open them to lose money. Does anyone?)  Going short some puts and short some calls is simple, beautiful, and graceful because the option prices decline daily, your premium becomes "safe" from grabbing hands, and your account goes greener with every tick until expiration - if things go your way.  That's the dream scenario:  That your underlying goes to sleep and doesn't budge from its park bench while call buyers are crying and put buyers are fuming and their money becomes yours, more and more till the clock runs out.

But somewhere there in the middle, the middle might not stay in the middle and you might see your strikes in danger of being breached.  As the strangle seller, I have done the following:  Bought the stock as the call strike loomed near, with the intention that those shares get called away.  What a beautiful solution, right?  You still get the full premium received from both legs, and you get a bonus in the form of stock bought and then sold at a profit, as the calls are exercised.  Now, let's not get into whether I've practiced this, exactly.  I've done it, but then closed the calls way up there in the loft, and what do you think then happened to my shares?  I got out of that scrape, still for a profit, but not quite as much as I would have, had I followed the described plan.  If you try to get fancy, you have to realize you're getting chancy as well.  But back on topic:

  The same thing works on the downside, as well:  You can short shares if you believe the lower strike will blow through. Have I done this?  I don't think so.  But I would, if the need arose.  What I am describing is transforming your naked calls or puts into covered calls or covered puts. Is this a fail-proof plan?  Is anything?  Well, this isn't, since you can take on the long or short shares, only to see them go the other way.  I've done this (making my short strangle into naked puts and covered calls) so few times that I can say I specifically remember it and it worked well when I did it.  But could I count on that?  Of course not.
 

Let's move on to the next thing on the menu I have become willing to try.  I love shorting volatility, and I need to leave a lot of unused cash to cushion that.  No position is a good one if it leaves you vulnerable to being wiped out.  So I have to be responsible and leave oceans of unused dollars serving as collateral to my short-scheming ways.  Could you blame a coyote for licking his chops, looking at all the dollars just sitting there doing nothing?  How about breaking out the cookbook (or at least the Acme catalog) and planning something new?

What to do when you'd really like to take a short position but don't want to risk being wiped out, or even if you'd just like to cap the loss you might realize?  Is it worthwhile to pay to cap that loss?  One way to do this is to simply buy calls when taking out short shares.  Today I shorted UVXY at 19.48 and bought one 19.50 strike call contract to go with each block of 100 short shares.  Now, I don't like to take losses (note the .02 difference between my shorting price and the call contract strike) and I don't like to pay for anything, so this wasn't a move I made while smirking and high-fiving myself.  In fact, I had to hold down the nausea from paying 0.98 per contract for this dubious privilege.  And I'm pretty sure I didn't construct this in nearly the best possible manner, so don't take this narration as instruction from me.  Take it as the "cry along with me" tale of how I possibly (not sure yet) messed up, but darn tootin tried, anyway.  To recap, I shorted at 19.48, which is $1,958 per block of 100 shares, and paid 0.98 per contract which is $98 to insure each 100-share block from rising to infinity or even some moderately high price and closing down my whole account in three days.  The idea is that if my short should fail, I could exercise my call and cover my short for just two cents higher than I opened it (or $2 per block of 100 shares), and I'd be out $98 per contract as well.  Not bad, I guess, and that could have been left as is.

But wait!  The story's not over.  I did bring in some salve for the burn:  .62 per contract received from selling puts at the 19.00 strike.  So there's $62 brought in per contract, and should UVXY rise (or even stay above 19) instead of fall, I can set $62 against my costs as detailed in the paragraph above.  So it looks like the worst that will happen to me is that I'll lose the $98 and the $2 and gain $62 and that comes out to booking a $38 loss per contract.  That would happen if $UVXY ends anywhere above my upper strike of 19.50.

Now, there's filling in the middle of this sandwich just as there is with the previously described strangle sandwich, although the filling isn't as delicious.  In this case it would be various degrees of disgusting (since I consider all losses unpalatable) as I might end up selling the calls for some puny price (if I hurry up and do it before they burn up at expiration) and booking an even punier gain on my short shares.  But then again, I did bring in some premium on my short puts, and I keep the full profit on that at every UVXY price over 19.00, so there's some ketchup to disguise the bad taste.  Let's take a theoretical ending price of 19.25 for UVXY on expiration day (Friday, April 21st) and compute it.  (I'm excluding commissions for ease of computation.)  The calls would expire worthless, so there's $98 gone bye-bye. The short 19.00 strike puts would expire worthless to the buyer and my entire received amount of $62 per contract would be retained by me to set against the $98 loss.  So far we're at a $36 loss per contract. I'd close my short shares for 0.23 gain per share, and per block of 100 shares that would be $23 gain. I'd be THAT close to being ahead, but would actually be $13 down, for the trouble of watching this drama unfold and end right near the bulls-eye.

If the bottom strike (the put) is breached, I'd have to buy it back to close (assuming I don't get assigned early and that I want to avoid being assigned at expiration), but of course, the more I have to pay for that, the more my short shares would be working to hand me the money needed to do that, dollar for dollar.  (Alternatively, as just mentioned, if I'm assigned long shares I could just close the position while setting the short shares against them.)  The maximum gain to me on this reverse collar would be UVXY ending lower than the put strike price of 19.00, which is the point below which I'd have to start paying something to buy the put back.  I'd make 0.48 per short share at that price and more, accordingly, at lower prices (although I'd have to spend the gain from those lower prices to defray the put-closing costs), so that after paying to close the short puts, I'd net $48 per block of 100 shares, with the long calls being lost money.  So at the worst case, I'd lose the $98 spent on calls, I'd make enough return on the short shares to offset any costs incurred in closing the short puts, so my maximum profit would be exactly as follows: The short put premium collected of $62 minus the long call premium paid of $98 plus gain made on the short shares which is capped at 48 cents per share because if UVXY ends under 19.00, any extra profit seen on those shares will be needed to pay to buy back the short puts, for a grand maximum total of $12.

I see what I could have done better.  I should have made sure the put premium received was higher, to make the risk on the top side worth my while.  In fact, a rule of thumb would be that the width between my shorting price and the put strike price, plus the premium on the short puts, should stand up against the price of the calls combined with any loss I'd take upon exercising those calls by an amount that I consider worthwhile, as compared to what I'd stand to lose, should the desired direction for the security (in this case, down for UVXY) not materialize as I wish it would.

Of course, there are various methods by which this can be closed out without waiting until the dealer gives out prizes when the hands are turned in.  I could close out any segment of this trade anytime, and reopen (or not!  See third paragraph.)  Follow UVXY this week and check back to see how I close out this clumsily-constructed first try at a reverse collar.

Tales from the cross-VIX highway

This post may also be seen at: http://www.cboe.com/blogs/options-hub/2017/03/06/tales-from-the-cross-vix-highway

While traders of nothing but the Essenpee would find themselves sitting on a gain of 1.5% to nearly 2% from February 14th through today (or through Friday, March 3rd's closing price, thus the difference between quotes), traders like me who favor TVIX or UVXY would be sitting right where they started, whether short or long. See chart below for a short history of UVXY over the last nearly-three-weeks.

My account performance shows a gain of several percent. How did I do that, when trading nothing but UVXY/TVIX? And when taking a large loss on short puts for UVXY at a level that was hardly seen again over a range starting minutes after my entry through the present?

 See the account progress, above.  Now, see the ill-fated set of UVXY puts below.



It's easy to imagine the feelings I had (but you can't imagine the curse words) during the remainder of the day on Thursday, February 9th, during all of Friday, February 10th, and for every minute up through February 15th when UVXY dipped down to 18.49 intraday.   That's a whopping $4.01 in the money on my short puts, when I had only received eighty-four cents each.  Unsure I was getting the best escape-from-punishment price, but eager to end the ordeal, I held my nose and bought the puts to close for $2.00 on February 16th, just one day from expiration.  Of course, the price changed in my favor, but not until one week after the scheduled run of this drama ended, and not for more than a crazed, chaotic UVXY-trading morning.  I was not trading UVXY that day, but it turns out I was in the process of getting some recompense from UVXY's country cousin, TVIX.

Note that aside from the unfortunate UVXY trade, I kept some plates in the air skillfully enough by way of shorting and closing TVIX repeatedly.  First, circled in green, you see four day trades made over the course of three days.  You'll see that I missed out on profit by closing the first short and then re-opening it from a lower price the next day.  But then I "double-dipped" (performing the same trade twice using overlapping price points to get extra profit.)  All during one day, I shorted from 4.18 to 4.12, then got back in once I saw a return to 4.19 and closed at 4.12 again.  Shazam!

The next trade, in which I simply lost $13, served to lighten my holdings so that I could short again from a higher level.  On February 22nd and 27th I established subsequent short positions that were closed later on the 27th (see blue box.)

When prices rose a little higher on February 28th, I shorted some more and closed those shares out on March 1st for some profit (see the orange box.)  Also within the orange box, I shorted some more on March 1st and March 2nd, closing each of those out within the day, one for essentially flat and one for a $62 loss.

Despite all these gains, and enough of them to make up for the bone-headed loss, I still believe I could have managed trades better and raised my account value higher by trading more aggressively (holding more shares short at any given point, and being slower to liquidate so many), but maybe I should look at the prices between the 14th and today and realize that I squeezed what I could out of that stone.  Any other change in value that doesn't seem to be reflected in the above trades has to do with shares in varying number held short from the beginning of this story through the present, which at times was zero shares but more often was and is currently considerably more.

Unexpected and Vicious

This post may also be seen at: http://www.cboe.com/blogs/options-hub/2017/02/06/unexpected-and-vicious

Today's saga starts on January 24th, just two days ago but it seems like last week.  I had just, the day prior, added to my core short TVIX position to raise the number of shares from 2,000 to 2,500 as you see in the portfolio graphic below.  The price for that lot of 500 was $6.26.  This will be revisited later in the post.

First, let's dispose of the TNA story.  You'll see that standing out at the top of the graphic like the subject of a "which of these things is not like the other" song.  TNA is also a little reminiscent of TNT, and that's not a ticker symbol, that's more like:

Just before one in the afternoon, I got it in my head to short TNA because I thought it wouldn't climb higher and I wanted to paid for that failure.  I got one thing right but I didn't get what I wanted out of it.  TNA didn't climb any more that day, but in order to avoid paying for the venture, I had to wait until after hours to get out with a couple of dollars in my pocket.  And a wise move that turned out to be, because the next day TNA kept right on climbing like I thought it wouldn't, to right around 106.50 before cooling off.  I'm glad it climbed without me, because I don't like paying to take a "heck" ride.

The other oddity in the portfolio (above) is the 26 strike UVXY short put.  That same day, close to noon when UVXY was trading at about 26.30 or so, I sold 2 puts for the following week's expiration for the 26 strike for $1.37 premium each.  My plan was to cash those in quickly on any substantial bounce, but UVXY just kept on dropping.  Check the price now (or as of my writing, which is Thursday, January 26th in the afternoon.)  UVXY is now 23.95.

Now see the portfolio graphic above.  This was taken the next day, January 25th, when my 26 puts had gotten substantially away from me, and UVXY was hovering above 24.  I did a repeat by selling two of the 24 puts short for $1.01 in premium each.

Later on January 25th, I saw TVIX hitting a level so low (the same level where it sits at this moment) that I was inspired to bring in that addition to my short made two days prior.  I judged the return to be so good within just two days that a retracement would be likely - if not immediately, then pretty soon.  The chance of missing out on more return seemed expendable in this case (due to what I estimated to be its relative unlikelihood) compared to the benefit of locking the profit in; so, that much -and only that much - of my TVIX short, I booked as such:

As seen in the graphic below which was captured today, the 24 strike puts are no longer my problem; I bought them back to cover at exactly the price I had received for them.  Though they would have been the more logical selection to keep rather than the 26 puts, I wanted to clear some clutter off my table and wanted to lessen my risk exposure.  Next I mulled over a plan to make my short puts less risky, possibly by making them covered.  One alternative was to simply dump them for the loss you see below ($161, and I hate taking losses).  As I cogitated and calculated, UVXY hovered around 24.76 for a good long while, almost as if it urged and beckoned me to go ahead and make my move.  So I went ahead and shorted 200 UVXY at that price, making my two short 26 puts covered, even at a disadvantageous price.  The reason I call that disadvantageous is:

If expiration day comes seeing me refuse to trade in the contracts and UVXY remains below $26, I'll be assigned, which means I'll have 200 shares of UVXY put to me (long) at the contracted price of $26.00 even.  I would think of this (or rather, I'd finagle it to come out this way) as buying to cover my 200 shares short, which obviously I just transacted at 24.76.  This would represent to me a loss of  $1.24 per share of $248 total.  Keep in mind, though, that I received $264.65 for selling the two put contracts in the first place.  This would net out to being essentially flat.  I made this move today, shorting the 200 UVXY, to "lock in" a guaranteed outcome of no money lost to me, should UVXY stay below $26 and should I hold the puts through expiration.  Naked, the puts could cost me any amount of money, limited only by how low UVXY may drop between now and expiration.  Covering them made the downside (meaning: UVXY dropping lower) worst-case scenario outcome known to me.

On the other side, though, having these 200 shares of UVXY short exposed me to more risk, since UVXY could rise above $26 (and to any level higher that it might feel like, especially during one of its regularly-occurring temper tantrums.)  And my only consolation would be the $264.65 pushed to my side of the table for taking on the puts.  In this case it would be great for the puts to be uncovered.  Who wants more ultra volatility shares short than they can handle during an unexpected and vicious volatility spike?  As you can tell, I have UVVS on the mind frequently; I have to keep it in mind to avoid being ensnared in a UVVS to a degree that it'll harm me.

To that end, while typing up this post, I closed out the 200 shares you see above, making my puts, once again, under-dressed for the weather.  I wish I could say I caught the bottom of the UVVD (unexpected and vicious volatility downplunger) that took place from 2:00-2:40 today, but I got most of the move.  I'll try to scalp some more day trades or short-term trades before the expiration of my short puts and see if I can offset any loss I'll incur, should the puts turn around and bite me with the teeth they're showing me right now and have been showing me pretty much since the moment I took them on.

Getting the 2017 Party Started

This post may also be seen at: http://www.cboe.com/blogs/options-hub/2017/01/11/getting-2017-party-started

The cliffhanger last time involved the $6.50 put for UVXY expiring this Friday, January 13th.  I had sold twenty contracts on January 4th for premium received of $0.18 each.  It turns out that I got nervous about this put when UVXY touched 6.57 later that day.  I knew I had time, but I also believed that the nature of UVXY was not on my side, and I began plotting to trade out of these options and eventually replace them with more advantageous ones.

It turns out I didn't have to wait long.  See the dip in option price the next day wherein I and apparently just a few others traded at eighteen cents, thus ending my obligation with this option before the price took off again for higher ground through today.

What happened to the 1,400 shares of UVXY (which, as you'll recall, made these options partially clothed, although uncouthly underdressed)?  After buying back the puts, I witnessed UVXY slide down an intraday hill to the low 6.70 range until I could not stand feeling "out of the action" and I sold 600 shares short at 6.74.  Ironically, this brought me up to the grand total of 2000 shares of UVXY I would have needed to support those puts as fully covered.

Right now, (as I write on Wednesday, January 11th around 3PM), UVXY is 6.17.  So what have I spun from a 57 cent drop in UVXY since January 5th, four trading days ago, when I had 2000 shares short at that time (but, you'll learn, I no longer do)?  Get out your calculator and you'll figure that, had I simply held those shares short through this moment, I'd have an $1,140 profit just on those shares.

The next day, January 6th, I bought the most recent 600 shares back to cover, immediately regretting it, but netting an even $100.  The regret stemmed from the additional gain I could have realized by waiting until later to close the short.  I then shorted other securities as a balm to the pain, but came home with nothing.  I usually don't detail such mundane happenings, but if anyone wants to see it, the combined escapades that day looked like this:

 Before that day was over, witnessing UVXY dip all the way down to about 6.23 and back up, I shorted it again at 6.50, only "losing ground" by about four cents from my last transaction in which I had closed it at 6.54 in the morning.  What happened after January 6th?  Only two full trading days elapsed after that, and today is still in progress, but the transactions were too numerous to narrate full stories on.  Instead, I'll give an accounting, excising another group of failed TNA shorts.  If anyone really wants to see that embarrassing sub-story, it's right here:

Here's the accounting breakdown:

So, with $200 slipping between my fingers there, let's detail the remaining transactions to date, first the UVXY and then some TVIX short I acquired on a few different dates so far this year.  The UVXY:

The green box shows the profit taken on the 600 shares shorted as an attempted continuation of the same short started when I closed the options.  The red-ringed lots represent the closing of shares shorted on the first trading day of the year.  And the remaining lots were opened this week and closed this week, through today.  At this moment I have no short shares of UVXY. What's not shown in that chart is that I was unable to borrow some shares for shorting today, and used TVIX as an alternative, and I also used TVIX intentionally two days ago to add to an existing pool of TVIX shorts I began accumulating before the year started.  The lots sold short this year were transacted at the following prices:

TVIX is currently 6.68, so my unbooked gain on the above is, right now, $560.  Disregarding profits I took on shorts started on the first trading day of the year, I only brought in a little more with all of my shuffling of UVXY shares, and would have been better to just hold the 2,000 shares since January 6th.

One of the goals I achieved today, however, was to lighten my exposure to combined TVIX/UVXY short shares by cutting it in half from a somewhat overweight position at the end of yesterday and a very overweight position this morning as I "doubled down" to try to get out of yesterday's "mistake" faster.  It worked; I got out unscathed, but as of this writing, UVXY/TVIX continue to drop along with VIX wallowing around in the low elevens, so I'm looking at profits missed out on today and feeling irritable.  I have to remember, though that it's essential for keeping my account intact that I make sure I'm out of the way if the train changes directions.  To mix metaphors, I'd like to have fun at the party, but it's more important that I get home from the party alive, even if that means leaving while it looks like the party is in full swing. 

Follow the bouncing... Arrow

This post may also be seen at: http://www.cboe.com/blogs/options-hub/2017/01/05/follow-bouncing-arrow

Yesterday, January 4th, in order to start out the new year with some degree of nail-biting (figuratively) drama, I hatched a little plan involving some short shares of UVXY.  The first thing I did was to buy to close 400 shares, reducing the 1,800 I had opened the previous day to 1,400 in quantity.  My plan was to re-short those 400 shares later in the day or on some upcoming day, along with 200 more which I envisioned as a day trade.

Then, thinking about the 1,400 short shares I still held, plus the 600 more I planned to acquire soon enough, I looked at premium for puts on the 6.50 strike of the same security.  As you can see from the graphic below, UVXY was trading in the $7 neighborhood when I sold 20 puts for the $6.50 strike and the January 13th expiration.

Of course, I was putting the cart partially before the horse, since I hadn't yet made another short sale of shares, so only 14 of these contracts were considered "covered puts" and 6 were plain old stark naked.

See chart below for the timeline of my trading so far this year.

Here is expanded detail of the put trade.  This chart tracks the exact contract.  Last week, trading price was just a few pennies.  This week, prices exceeded twenty cents.  My price received was eighteen cents.

Several courses of action are available to me at this point, particularly regarding the short puts.  I could keep them and hope they expire worthless on January 13th.  This would require UVXY to close above $6.50 on that day.  I could trade my way out of the puts, by buying them to close and making a profit, breaking even, or taking a loss.  I could leave six of the contracts naked, or I could short more UVXY shares to make some or all of the contracts covered.  Of course, I could buy back any number of my existing short shares to make any number (including all ) of my contracts uncovered.

Will UVXY change in price today or in an upcoming day such that I'll feel motivated to close my short puts?  Will it appear safe to leave those puts open through expiration?  Since I received eighteen cents in premium, UVXY could close as low as $6.32 (that's $0.18 lower than the strike of the contract) on expiration day and I'd be able to realize no loss upon covering the short shares just before expiration.

Will UVXY rise enough that I'll decide to re-short the shares I recently closed, and will I want to short even more shares?  Or will it rise so much that I'll want to keep watching it for a higher entry point?  Will it continue to sink, yet I'll decide to short more UVXY shares anyway?  Or will I close all of them?  These are all questions that will be answered in my next blog entry, as the near future unfolds.  If you've read this far, you must be following along, and if you've been doing that, I'm glad!