I was able to exit most of my position in UVXY today.

music selection: “Night Songs” — Cinderella

You may remember on 20JUL2015 I purchased the 5 strike 20JAN2017 expiry UVXY puts.  I set up a spreadsheet in MS Excel to identify the price on any given day where I can exit for 200% or greater annualized returns.  The right pricing was available today so I struck like an ambush predator should.  I was able to sell contracts at 1.84 (original purchase price 1.55), w00t!

The trade was open 31 days so my annualized return is (1.84 – 1.55)/1.55/31*365 = 220%.  Two hundred twenty percent is Brontosaurus size haul.  So far this year, the strategy of buying out of the money long dated puts on UVXY has returned 206%, 194%, and now 220%, for an average of 206.67%.  That is a little better than a triple without even including the value of any compounding.  Since I allocation 5% of my portfolio to this strategy, I have added 10.33% to my annualized return on top of what I earn through high yield, insurance, bonds, and DGI on the remaining 95% of my portfolio.  Put another way, this single strategy more than covers my higher than normal ~8% withdrawal rate.

This strategy can’t be counted on to deliver an annualized triple every time and it is possible to lose money in the trade (don’t buy high!)  So it is important for any lizards playing the Home Game Version ™ to keep their allocation down to 5%.

Pricing is a little inflated in these puts right now due to some perceived macro factors such as Chinese Yuan devaluation.  So I’m going to hold off a few days before rolling.  For now, there is not a lower strike to go to so I’ll be trading an alternate stock that is similarly constructed to UVXY and has a long history of rapid decay from contango.  I hope to reveal that on Friday or Monday if the Mr. Market can get over his heebie-jeebies by then.

Devour your prey raptors!

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Selling UVXY puts for 220% annualized return

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2 thoughts on “Selling UVXY puts for 220% annualized return

  • October 4, 2015 at 6:03 pm
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    I own shares at $60, thought Friday it would spike, and it closed at $48, any advise how to protect from here?

    Reply
    • October 4, 2015 at 11:12 pm
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      I never go long against UVXY. All plays are bets the price will decline due to contango in the futures market.

      Reply

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