Updating the list of pranks I have so far pulled on UVXY

Another one added to the bottom of the list, changing the totals:

September 8, selling the Sept11th expiration:

Short 25.50 calls at 1.71, long 27 calls at 1.26, credit of 0.45

Max profit is 0.45 or $45 per block, max loss is 1.05 or $105 per block, closed for max profit

 

September 10th, selling the Sept18th expiration:

Short 23.50 calls at 1.92, long 25 calls at 1.55, credit of 0.37

Max profit is 0.37 or $37 per block, max loss is 1.13 or $113 per block, closed for max profit

 

September 11th, selling the Sept25th expiration:

Short 22 calls at 2.386, long 23 calls at 2.138, credit of 0.248

Max profit is 0.248 or $24.80 per block, max loss is 0.752 or $75.20 per block, closed for max profit

 

September 18th, selling the Oct2nd expiration:

Short 20 calls at 2.164, long 21 calls at 1.914, credit of 0.25

Max profit is 0.25 or $25 per block, max loss is 0.75 or $75 per block, closed for max loss

September 22, selling the Oct2nd expiration:

Short 25 calls at 0.884, long 26.50 calls at 0.732, credit of 0.152

Max profit is 0.152 or $15 per block, max loss is 1.348 or $134.80 per block, closed for max profit

September 25, selling the Oct9th expiration:

Short 24 calls at 1.45, long 25.50 calls at 1.21, credit of 0.24

Max profit is 0.24 or $24 per block, max loss is 1.26 or $126 per block, closed for max profit

October 5, selling the Oct16th expiration:

Short 22.50 calls at 0.90, long 24 calls at 0.68, credit of 0.22

Max profit is 0.22 or $22 per block, max loss is 1.28 or $128 per block, closed for max profit

 

October 16, selling the Oct23rd expiration:

Short 18 calls at 0.48, long 19.50 calls at 0.31, credit of 0.17

Max profit is 0.17 or $17 per block, max loss is 1.33 or $133 per block, closed for max profit

Adding these together, my goal was to make $209.80 per block, and I risked losing $890 per block.

All of the spreads were identical in quantity.  I lost on one and won on all the others, so my actual gain/loss netted together was a gain of $109.80 per block.

 

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Raking the money off the far side of the table

One of my strategies lately has been selling call spreads against UVXY.  Hunting for premium at, or preferably above, the current trading price, I set up 1 - 1.5 width credit spreads, and so far, all of them have paid off in their entirety by expiring worthless (I closed none early or for less than maximum profit) except one, which was assigned to me.  That was the day the president announced being infected and the market had a major conniption.  I could have handled that one better but I ended up taking the maximum loss on it.  Here is the list of spreads:

September 8, selling the Sept11th expiration:

Short 25.50 calls at 1.71, long 27 calls at 1.26, credit of 0.45

Max profit is 0.45 or $45 per block, max loss is 1.05 or $105 per block, closed for max profit

 

September 10th, selling the Sept18th expiration:

Short 23.50 calls at 1.92, long 25 calls at 1.55, credit of 0.37

Max profit is 0.37 or $37 per block, max loss is 1.13 or $113 per block, closed for max profit

 

September 11th, selling the Sept25th expiration:

Short 22 calls at 2.386, long 23 calls at 2.138, credit of 0.248

Max profit is 0.248 or $24.80 per block, max loss is 0.752 or $75.20 per block, closed for max profit

 

September 18th, selling the Oct2nd expiration:

Short 20 calls at 2.164, long 21 calls at 1.914, credit of 0.25

Max profit is 0.25 or $25 per block, max loss is 0.75 or $75 per block, closed for max loss

September 22, selling the Oct2nd expiration:

Short 25 calls at 0.884, long 26.50 calls at 0.732, credit of 0.152

Max profit is 0.152 or $15 per block, max loss is 1.348 or $134.80 per block, closed for max profit

September 25, selling the Oct9th expiration:

Short 24 calls at 1.45, long 25.50 calls at 1.21, credit of 0.24

Max profit is 0.24 or $24 per block, max loss is 1.26 or $126 per block, closed for max profit

October 5, selling the Oct16th expiration:

Short 22.50 calls at 0.90, long 24 calls at 0.68, credit of 0.22

Max profit is 0.22 or $22 per block, max loss is 1.28 or $128 per block, closed for max profit

Adding these together, my goal was to make $192.80 per block, and I risked losing $757 per block.

All of the spreads were identical in quantity.  I lost on one and won on all the others, so my actual gain/loss netted together was a gain of $92.80 per block.

Follow me on Twitter: @grapeswhiz

How to lock in a gain on that short while keeping it open

If anyone is curious about what I did with yesterday's trade, I walked it down the hill. Of course the sizeable gain on the short is tempting, but my goal is to keep this open and continue chomping bites off the downside, so long as market conditions allow.  Here is a write-up of the trade I described yesterday and today's changes.

As you can see, if next week the VIX-cano erupts, I can just exercise those calls and close the whole thing out.  Margin requirements would also increase on the position, should a rocky week force me to wait it out through share prices higher than the strike of my most-recently bought calls.  

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How to get a no-cost, risk-free short

Just kidding - nothing is free - and in this case what I gave up was a profit sitting there ready for the picking.  But I wanted to short this security without paying for the privilege, so without actually paying (so yeah, it WAS free if you don't count the profit I could have taken that I chose not to), I got what I wanted.

Everyone who knows me knows that I'm always trying to make money off the downside of UVXY.  Here are the nuts and bolts of how to attempt getting in for free:

Shorted a few days ago at exactly the price of 20.50 and also got calls against those shares at the same strike.  So the math (ignoring commissions) goes like this:

500 UVXY shorted at 20.50 is a credit of $10,250

5 UVXY Oct9th 20.50 calls were 0.89 each, or a cost of $445

Should Friday the 9th come, and the need to exercise arises, and there's no way to skim anything off either direction of those liabilities, the worst case scenario would be an exercise at 20.50, so no loss or gain on the stock, and the entire option cost of $445 flies away to bye-bye land.

After turbulent Tuesday, wishy-washy Wednesday and thrilling Thursday, UVXY went down the 18.00 sliding board and landed in the sand looking at sweet seventeen.  So today I decided, instead of taking a $500 or so profit that I could take (anyone thinking I'm foolish right about now?  It could be true!) I decided to pursue my dream of the risk-free, cost-free short.

Leaving the shares undisturbed so as not to alert them that anything is up at all, I stealthily bought 18.50 calls for next week at the going rate of 0.96 or another $480 debit to me.  Bringing in the consolation prize of just 5 cents on the previous options netted $25, bringing my new total pile of options cost to $900.

But since my new strike is 18.50, should I have to exercise next week, I'd bring in $2 per share on those shares shorted at 20.50 for a $1,000 boost to my account and a total max loss of $900 on the options, for a $100 gain overall.  I consider this basically flat, or a chance to keep this short going and hope that eventually I can expand the size and widen the gap between my costs and worst-case profits.  Who knows what the future will bring, but I started three days ago with nothing but an idea, and now I'm in the game for free.

Follow me on Twitter: @grapeswhiz