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Update UVXY 50% annualized return

I sold my 13 strike UVXY puts.

music selection:  “Jersey Girl” — Bruce Springsteen

I purchased UVXY180119P00013000 for 6.95 a share on 15AUG2016.  I put in a sell order as the strike has moved into the money.  I sold my contracts for 7.85 a share this afternoon.  The trade was in force for 94 days and yielded an exceptional 50.28% annualized.  I collected over 3.3k in profits on my 37 contracts.

I rolled down and out to the 8 strike with UVXY190118P00008000 and paid 5.65 a share. I’ll be looking to exit the trade after 30 days or when the strike moves into the money, whichever comes first.  I’m keeping my allocation here to 10% of my IB account balance by cost basis.  I also have an 11 strike play on this same theme in my IRA account that should move into the money and be ready to roll soon as well.  Long dated, out of the money, puts on UVXY remains my highest conviction idea.

Devour your prey raptors!

{ 8 comments… add one }
  • Mattia November 18, 2016, 8:07 am

    Isn’t it better to just hold ATM Puts and wait for the ever-falling strike to inflate your profits? I know you’d be “stuck” with it until expiration, but you already wait a long time to write your exit Puts anyway, so…

    Also, what happens when the strike nears 0 (or gets to 0)? Will there be an upward “correction” or will it stay there forever (or even go into negative)?

    • The Lizard King November 18, 2016, 5:06 pm

      There is a concept with options trading known as “delta”. That is the “greek” that describes how much the premium price changes relative to moves in the price of the underlying stock. It moves faster when moving from out of the money to at the money than it does when moving from at the money to in the money. You take on more risk by going out of the money but you earn a higher return.

      The price cannot go negative. When the price gets “low” the issuing back does a ‘reverse split’ of shares to reduce the number of shares and increase the nominal price.

      Thanks for reading Mattia!

      • Seb Loeb November 22, 2016, 4:43 pm

        How does the reverse split affect the option price? Does it change your strike and cut the # of shares?

        • The Lizard King November 22, 2016, 5:13 pm


          That is a fair way to look at it. The new ticker gets changed to something that begins with UVXY1 (or another number) to denote it is pre-split. It’s still nominally at the original strike for nomenclature but it reflects post split sizing. I’ve been through multiple reverse splits with the trade it force and it is not problematic.

          • Jimbo November 22, 2016, 9:57 pm

            No issues with liquidity or wide bid/ask spreads on the options held through the split?

          • The Lizard King November 22, 2016, 11:34 pm

            I haven’t had any trouble in the past.

  • Frugal Trader November 18, 2016, 4:09 pm

    Congrats on the profits.

  • Ray December 6, 2016, 10:46 pm

    Thanks for the info. I will try this trade as it seems to be a high probability of making a profit. Thanks for sharing.

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