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Update UVXY Puts

I sold the UVXY puts.

music selection:  “Between Love And Hate” — The Strokes

weigh-in:  205.2 +0.2

I originally purchased UVXY190118P00020000 on 8AUG2017 for 10.25 a share.  Volatility soared shortly thereafter on international tensions with North Korea.  I was able to sell today for 11.24 a share.  The trade was in force for a scant 6 days and yields and enormous 587.56% annualized.  For sure, this is not going to be very repeatable but you have to take big gains when you can get them.  I’ll be waiting for volatility to calm down a touch before re-establishing a position.

In other news, Avis (CAR) passed its stop loss of 18.05 on Friday.  I sold today for 18.79.  The position had 223 shares outstanding and basis of 5,929.61.  Proceeds were 7,825 for a net loss of 1,895.46.  The trade was in force for 308 days and yields negative 37.88% on an annualized basis.  It has been hard to be short lately but I am sticking to my guns.

Devour your prey raptors!

{ 13 comments… add one }
  • Chris B August 15, 2017, 2:56 pm

    I’m on the verge of resolving to go all in with short-duration put options next time UVXY soars 40-50% in response to what somebody said on Twitter. I sat and watched with my popcorn this time, and sure enough the old pattern repeated and after the spike UVXY returned to its old trendline, experiencing a briefly accellerated decline in value. I wish I had more closely watched option prices to see the effect of I.V.

    • The Lizard King August 15, 2017, 4:39 pm

      An old MBA finance professor of mine said “Daddy always said,” [‘Daddy’ was also a PhD professor of finance from West Texas] “You pays your money. You takes your chances.” Daddy also was known for saying “Bulls and Bears both make money but Hogs always get slaughtered”. Point is, don’t get greedy. Going all-in should not be a 100% allocation of your portfolio. Never risk more than you can afford to lose. I think you are likely to make good scratch off such a trade though. I prefer the slow, steady, and repeatable nature of the long dated puts is all.

  • catfishwizard August 15, 2017, 5:13 pm

    I too was long UVXY LEAPS puts leading into this recent bout of nuclear nonsense, and I realized something fascinating about how the premium prices move.

    On 8/10, UVXY spiked up 30+% as it is designed to do…but my puts were also UP 5%…

    Normally you would expect put premiums to drop with that kind of a positive move in the underlying, but everyone was buying these puts anticipating that the spike was only temporary, so the premiums were actually being pushed up.

    To wit, I then purchased another LEAPS put on 8/11/17 (peak volatility) and the premiums haven’t budged despite yesterdays collapse in the UVXY share price.

    You’re statement, “I’ll be waiting for volatility to calm down a touch before reestablishing a position” is mind bending, but spot on.

    By the nature of the trade you would expect to want high volatility when you initiate the position, but that’s actually backwards because that’s what everyone else is trying to do.

    This trade is so crowded and weird.

    It really is a lot of fun.

    • Chris B August 15, 2017, 7:37 pm

      I noticed the same thing. Time till expiry seems to be the controlling factor determining whether a spike in UVXY will cause a put to rise or fall. When a spike happens, implied volatility seems to play a bigger role in the long-range puts (increasing their price) and delta has a bigger effect on the short-range puts (decreasing their price). There might be a calendar spread arbitrage opportunity here, particularly during forseeable volatility events like elections or Fed meetings.

      • The Lizard King August 15, 2017, 10:37 pm

        Interesting idea on the calendar spread to capture volatility events. I’m content to take what I can get with just the LEAP puts. It is just such a safe trade if you have the patience.

      • Chris B August 18, 2017, 4:41 pm

        It just happened again. My December $10 puts are down. My January $10 puts are up. So weird.

        • The Lizard King August 18, 2017, 7:48 pm

          I have to remember my formal finance education. The markets are perfectly efficient they told me…

    • The Lizard King August 15, 2017, 10:35 pm

      I’ve seen this behavior half a dozen times. It is counter-intuitive but reliable.

  • financialfreedomsloth August 15, 2017, 6:11 pm

    I got 11.3 for mine but I put in the order yesterday morning, then we went urban exploring and off the grid for the rest of the day and today had visitors. A suick log in showed the position sold! Nice profit for only 6 days. Now waiting until the madness goes down …

  • Chris B August 28, 2017, 9:59 pm
    • financialfreedomsloth September 3, 2017, 1:28 pm

      NAh, just another guy doing short term gambles on it. Fantastic results in you are lucky, fantastic losses in the other case. I, for one am glad for the added liquidity! With the LEAPs Velociraptor does you should make a profit consistently. Not a huge one, but nice enough. And most important of all: predictable with no chance of being wiped out

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