Music Selection: “Paint it Black” — Rolling Stones
Buying puts on UVXY was one of the very first recommendations at the Raptor. It worked out for a 30.3% annualized return on Friday. Today, I am rolling the position forward to capture more gains.
The thesis comes down to this, the futures contracts the security is based on will spend 90% of the time in a state of “contango”. This means the firm will incur a daily cost to roll their position forward. This cost will erode the value of the security dramatically (about 85% a year) most of the time. We can profit by betting against “the worst security in America”.
My action this morning was to buy UVXY170120P00003000 for 1.12. For the options designation impaired, that is the January 2017 put at a strike of 3.00. UVXY is currently trading around 9 and can easily be expected to fall by two thirds in a year and half’s time. The position will probably be closed for a profit before then. I will keep you all updated.
Devour your prey raptors!