I liked the look of my unrealized gains on two UVXY puts this morning and tried a limit order.

music selection: “E-Pro” — Beck

I was able to sell both UVXY170120P00003000 and UVXY170120P00010000 at favorable prices.  The three strike (15 pre split) was originally purchased on 18MAY2015 for 1.12 a contract.  I was able to sell today for 1.50 a contract.  Over 60 days in trade that comes out to an annualized return of 206%.  Celebrate!

I similarly purchased the 10 strike put on 19JUN2015 for 3.70 a contract.  I was able to sell today for 4.25 a contract.  Over 28 days in the trade that comes out to annualized return of 194%.  Celebrate some more!

Since launching the blog, I have had annualized returns on UVXY puts of 30%, 206%, and 194%.  That is an average return of 143%.  This is why buying long dated puts on UVXY is my highest conviction idea.  For sure, there is a small chance of losing the entire investment but there is a strong chance of radically outperforming the market.  As long as you keep your position size small, you should recover nicely from any black swan events that result in a loss on the trade.  Also, it is wise to exit the trade when the put is in the money to book gains or cut losses.

I’ll be back Monday with a new trade to establish a new position in UVXY puts.

Devour your prey raptors!

Superior return on UVXY Puts

Never miss another opportunity to devour prey!

4 thoughts on “Superior return on UVXY Puts

  • July 18, 2015 at 12:12 am

    Hi LK – I just finished devouring your entire blog. I read Vish’s comment here:


    in particular where he said:

    “You have, more than any single Financial Blogger, instituted and practiced the savviest Multi-Pronged Synergistic Purposeful Planning Strategy I have ever come across. I say this after lurking at Seeking Alpha, The Fool, Dailytradealert, all the DGI blogs, at least 50 of them. Your writing style is clear. concise, crisp, and most important of all, never, ever condescending. Some of the DGIs are too set in their ways, and thin skinned, but as we all know, there is more than one road to Rome and FI”

    and found myself pretty much +1’ing this sentiment.

    I want to get your opinion on my situation. I am based in Australia, and on the ASX the market for selling options is quite challenging. I’d say the key characteristics are:

    * You only generally see decent liquidity for about half a dozen Australian banks and two miners (or the index itself, which would require me to take on leverage)
    * There are only about four market makers providing prices
    * Spreads are extremely wide. For example, for NAB which yesterday was trading at say $34.30, the Aug 27 (41 days out) 33.62 (European) put was trading at 0.46/0.58.
    * Trading cost is about $11/trade.
    * If you were to sell 5 lots of this put your annualized returns would be 11.6%, 13.2% or 14.8% depending on whether you were executed at the bid, mid or offer respectively. Basically there are very few free lunches, but it’s not a complete wash.
    * Experience has shown that for retail punters, if you want an execution your best bet is to place your offer near the best offer and move it towards the bid. One of the market makers will usually give you an execution on the bid-side of the mid.

    I’m assuming if you trade in the US you are usually crossing the spread and taking the bid which would mean that I could theoretically be better off in Australia if I was getting executed at or around the mid, but would like your opinion regardless. It goes without saying that due to the high cost of trading a lot of avenues are not available to me at the size I’m doing, but I’m happy to patiently write puts and covered calls.

    • July 18, 2015 at 1:09 am

      Thanks for the kind words! It makes blogging worthwhile.

      11AUD for a trade is a little high. I used to pay about that much and still made out ok but it limits you to usually going further out on expiry to keep transaction costs as a percentage of premium reasonable. I find 6 weeks out is the sweet spot for time decay on American options, European options in the Oz market might be different. You’ll have to do some research.

      I have switched to Interactive Brokers for my trading. I get about 75 cents (US) pricing for options trades. The margin rates (which serves as my emergency fund) are the best and they are generally regarded as the fastest for executions. I just checked their Australian pricing (https://www.interactivebrokers.com/en/index.php?f=commission&p=options3) and see 2.00 Australian for index options. I can’t offer individualized advice to you (that requires a license in the States) so I’ll leave it up to you decide if two dollars is less than eleven dollars in your specific situation.

      For liquidity, you might check at different times of the trading day. In the states, there is a rush of liquidity in the morning and late trading day with weak volume around lunch. Your spreads aren’t that much wider than in the US for a lot of issues. If you are trading something like the S&P 500 index spreads will be a penny. On my favorite play, UVXY, spreads today were almost a dollar. You take what you can get.

      I actually usually get something similar to your pricing (bid side of split). If you are checking pricing after I place my trade, you are seeing the updated bid which would be about the last price executed.

  • July 18, 2015 at 2:19 am

    Thanks for the non-individualized-advice-containing response! Very helpful insights there.

    Just wondering, things like:

    “I find 6 weeks out is the sweet spot for time decay on American options, European options in the Oz market might be different”

    Are you planning on putting together a “Zen of Velociraptor” summary with all these tips? I’ve made notes as I’ve gone through the site but again they’re specific to me and my situation, things I can use etc.

    (btw we also have American options over here)

    In addition to IB we also have Optionsxpress, and I’ll probably pull the trigger on one of them in the next couple of days.

    • July 18, 2015 at 12:45 pm


      I hope to put together an options the Raptor way how-to and put it on Amazon’s ebooks platform. I’d probably price it at 99 cents US (the minimum allowable price) to spread the Gospel as widely as possible.

      Good luck finding the low cost broker in your jurisdiction.


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