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114% Annualized Return on UVXY Puts

The results of the A/B Test are in.

music selection:   “King Of Pain” — The Police

Back on 2OCT2017, I set up an A/B test on different strikes of UVXY.  I bought strikes 5 dollars out of the money and 5 dollars in the money to determine once and for all which strategy performs better.  The results are in and out of the money wins by a large margin.  This makes sense as the out of the money strike carries more risk of loss of investment.

I originally purchased UVXY190118P00015000 for 8.55 a share.  Today, I sold for 9.50.  The trade was in force for 30 days and yields 135.19% annualized.  Likewise, I purchased UVXY190118P00025000 for 16.80 a share.  Today’s sell price was 18.05.  That trade was also in force for 30 days and yields 93.65% annualized.  The simple average of the two returns is 114.42% (annualized.)  I am very happy with this outcome.  And I will buying my puts about 1/3 out of the money going forward.

I got back into the trade with 55 contracts of UVXY190118P00010000 at 5.55 a share.  That is a roughly 10% allocation of my main IB account and curiously, a lot of “lucky” fives.  I will target a holding period around 30 days but will sell sooner if the contracts move into the money.  I will be a very happy lizard if I can repeat today’s performance.

Devour your prey raptors!

{ 4 comments… add one }
  • financialfreedomsloth November 2, 2017, 1:43 pm

    got in at 5,50 USD! Really ramped up the size also, 53 contracts. As usually, I will be getting out with a 10% profit.

  • Joseph Bleaux November 2, 2017, 2:30 pm

    Not to brag about out-doing you, Velociraptor, and I also snagged my contracts at 5.50.

    What are you thinking of doing when the January 2020 LEAPs start trading? Will you roll out your position or hold until you reach your profit level?

    In your experience, will we have to pay up for the additional time on the new LEAPs?

    • The Lizard King November 2, 2017, 2:50 pm

      Joseph,

      I’ll hold the 19’s until they are “ripe” usually around the time they cross into the money. I’ll roll down and out to the 20’s at that time. We will certainly pay more for puts with more time value. You will recover it when you sell.

  • kimobear November 6, 2017, 7:41 pm

    So it appears that slightly out of the money is more profitable in a steady market without any volatility spikes. Good stuff to keep in mind when setting up for the next round of UVXY trades.
    Thanks.

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