I have finally re-entered the UVXY trade.
music selection: “Tik Tok” — Ke$ha
Buying long dated puts on UVXY remains my highest conviction idea. UVXY attempts to track twice the daily movement of the ^VIX by daily rolling the 14 and 40 day futures. The 40 day futures will naturally almost always be more expensive than the 14 day futures as there is more time value to be accounted for. Economists call this contango.
The long term effect of repeatedly selling a “cheap” asset to buy an “expensive” one is for UVXY to decline an average of 87% a year. There are sometimes sharp price spikes but the long term trend is irreversible. You can pick up some pretty easy money by buying long dated puts and holding for a short period of time to capture this decay.
Today, I bought UVXY190118P00020000 for 11.57 a share. I’m targeting a minimum holding period of 30 days and looking to sell any time my annualized return exceeds 50%. I’ll then roll down and out. Annualized gains so far this year include 26.92% over 48 days, 65.43% over 28 days, 24.16% over 175 days, and 587.56% over 6 days. Cash profits are 7,966, making up the largest portion of my options related income for the year.
Devour your prey raptors!