Stock Investment » VXX

Stocks Investments :Closed VXX Naked Call

admin — Sun, 11 Dec 2011 13:06:27 +0000

I was planning to ride my VXX naked call all of the way to expiration and then sell covered puts on it for as long as I could ride it. Once I saw $SPX hit resistance around its 200 day moving average I started wondering if my downside risk was greater than my upside potential [...]

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I was planning to ride my VXX naked call all of the way to expiration and then sell covered puts on it for as long as I could ride it. Once I saw $SPX hit resistance around its 200 day moving average I started wondering if my downside risk was greater than my upside potential and decided to exit and try it another day. While VXX was trading at .13 I bought to close one December naked call for .30 and paid $0.72 with commissions. This gave me a realized loss of .46 on this option. I almost made a few cents on it, but my original order didn’t hit and I had to chase it up the ladder some. I could’ve bought this call back with a market order for .95 just a few minutes before I changed the order.

$SPX was around 1,258 at the time I made the trade and now it’s down to 1,252 while I write this with VXX up to .80. I ran a few alternate trades through my head before running with this one. All of them pushed me into January with VXX exposure and I didn’t really want that any more. I thought selling a January covered put for a little more than .00, but figured VXX could pop another .00 higher and waste more money for me in a single day. That made me consider a January covered put for about .00. It would’ve put my cost per share around .00 and might not have been a bad trade since I would’ve set myself up for another 0 profit over the next seven weeks. I really debated that, but finally decided it was better to just get out, move on and concentrate on my core positions of index ETFs. I’ll probably come back to VXX again next year and might start my trade with a calendar spread to try to work off the faster time value erosion in the front couple of months versus four to six months out.

I also considered new covered calls on JPM. I have December covered calls on my 200 shares right now. I’ve left them in place even though they are only worth $content.10 so that I’m forced to sell if JPM rips higher again. It’s already so far off its recent lows that I wondered if I should lower this strike and try to get out with the guarantee of more premiums in my pocket. I got as far as entering the limit order, but never hit “transmit” before I deleted it. I’ll probably regret not taking in more premiums since JPM looks like it might have gained as much as it’s going to for now. I opted to risk it though and see if how it does tomorrow. If it starts to falter, I’ll go ahead and sell new covered calls at lower strikes or might just close the position if it looks too risky.

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Stocks Investment :Sold VXX December Naked Call

admin — Sat, 03 Sep 2011 12:59:52 +0000

In the comments section of my last post I was asked about any VXX options I might be considering. I mentioned I thought a naked call on VXX could be profitable. Today I entered a limit order good through Monday and didn’t think it would hit until Monday, but it did. While

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In the comments section of my last post I was asked about any VXX options I might be considering. I mentioned I thought a naked call on VXX could be profitable. Today I entered a limit order good through Monday and didn’t think it would hit until Monday, but it did. While VXX was trading at .98 I sold one VXX December naked call for .00 and received 9.26 after commissions.

When I entered the order I think this strike was at the money, but the volatility spike this afternoon sent the premium up to where I could’ve gotten another dime out of it. Even though this is a naked call, which is typically viewed as very risky because of the unlimited loss potential, I don’t see this trade as having a lot of risk. First of all VXX topped out this week at .06. When you consider the extreme volatility we saw this week and the amount of fear in the markets, that’s not too high. My cost per share to sell VXX if assigned would be .99, almost .00 higher than the recent intraday high. In addition, the day VXX hit this intraday high it closed below .00. The highest close for the week was .43. It’s possible VXX could trade above .00 before my option expires, but the risk of it finishing in December above .00 is very low in my opinion.

One of the reasons, aside from my expectation that we could rally into the end of the year, is that VXX is flawed. Due to contagion within the instrument, VXX is destined to lose value over time, even if the VIX stays flat to slightly higher. I felt this pain when I was long VXX, but I think I’m playing it on the correct side this time. VXX is a worthwhile tool to use on the long side in a fast slide, but in most market conditions it’s a better one to be short, especially over longer periods of time. I thought about using the September expiration, but decided the December contract was safer. I still think the September (or probably even ) strike will finish out of the money, but there was no need to risk that yet.

I might add another short call if the volatility continues to contract. If we get another spike into the upper s I’ll most likely add another short call at a higher strike when I think the market bottom is in. We might not be at a bottom yet, but with only one call I don’t think I’m overexposed. I have no doubt VXX will sink over time, so I’m not putting a cap on how high I’ll chase it with naked calls if I’m wrong in the near term. I’m assuming I’ll be able to hold the shares short in my IB account if I’m assigned. If this trade works for me it will give me a return of 17.69%. That’s a 59.45% annualized gain. That’s the kind of risk/reward I like.

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Stocks Investments :Sold VXX Covered Calls

admin — Sat, 23 Apr 2011 10:23:36 +0000

I have mixed thoughts about this market. On one hand I think the bull market has more time left in it just solely based on the time we’ve run from the bottom to present. On the other hand the ground we’ve covered has me wondering if a solid 10% correction still isn’t

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I have mixed thoughts about this market. On one hand I think the bull market has more time left in it just solely based on the time we’ve run from the bottom to present. On the other hand the ground we’ve covered has me wondering if a solid 10% correction still isn’t in order. We’re still down 2+% from the February highs, so that would only be less than 8% lower from here. Then again, a few months of sideways price action can do the same good. We’re two months into that now. What it comes down to for me is that any sell-off probably won’t last too long and might not even be much lower than it is now. Since we’re not just driving off a cliff quite yet I decided to squeeze a little more cash out of my VXX position.

While VXX was trading at .64 this morning I sold two VXX June covered calls for .30 each and received 9.29 after commissions. This is both a bullish play and an uncommitted sideways or slightly down play. I gave myself a good bit of upside protection from a spike in the VIX. In March when the VIX spiked, VXX shot up above , but only intraday for a single day. The chances of a bigger correction are debatable for sure, but at the same time VXX is trading at a lower starting point than in March. I think I could’ve played this position with a much lower strike, maybe even down to , but June is when my long puts expire and I plan to exit the position around then most likely. I didn’t want a bigger VXX spike to come along and catch me selling my 200 shares below while taking a smaller profit on my long puts I’ll close then. The way I worked this, any movement below is moot for me. All upside in the ETF is matched by downside in the long puts and vice versa. Above and I stop getting the upside in the shares due to the covered calls.

I changed my plans to exit my VXX position to “most likely” since I could change my mind if VXX has fallen a good bit more by then and I start to think we are more likely to have a correction. I might just sell my long puts for a profit and then sell in the money (ITM) covered calls again in June. The risk with that trade would be that VXX continues to lose money quicker than the calls lose time value and intrinsic value. We’ll see. I have two months to go before I make that decision.

In other news I thought oil was going to roll over this morning, but now I see it’s up. If this flattening holds into tomorrow I’ll probably go ahead and sell one UCO naked put. It’ll be a one third position with me ready to sell two more puts on further declines. If I wasn’t already in BA I’d sell another put on it too. One is enough for now though. I’m due to get back into VNQ again and continue to debate INTC. I’m glad I only took a small position on my risky trade into DSX. It fell below support yesterday and has fallen deeper today. Eventually it’ll be a buy again and I’ll double up on it at some point.

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Stock Market Investment :Options Expiration – April 2011

admin — Sat, 23 Apr 2011 10:23:36 +0000

I had short options on four different stocks/ETFs that expired today. All were profitable and I plan to work with all of them again for either May or June expiration options. My only April option that wasn’t profitable was QCOM and it was assigned a couple of days ago and

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I had short options on four different stocks/ETFs that expired today. All were profitable and I plan to work with all of them again for either May or June expiration options. My only April option that wasn’t profitable was QCOM and it was assigned a couple of days ago and has gained some ground since then.

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Stock Investment :Revisting Old Friends – UCO, JPM, VXX

admin — Wed, 23 Feb 2011 13:36:38 +0000

I’ll admit I was kind of happy to see the futures down this morning when I turned on CNBC. I knew that meant I could get into some positions at better option prices than if I had sold the options last week. Then I saw oil was up pretty big on the Libya news and [...]

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I’ll admit I was kind of happy to see the futures down this morning when I turned on CNBC. I knew that meant I could get into some positions at better option prices than if I had sold the options last week. Then I saw oil was up pretty big on the Libya news and I knew I missed a great opportunity for lower oil prices by a day, but I didn’t have a choice due to the wash rule keeping me out of UCO until today. Of course I could’ve used USO or something else, but I like UCO better for selling options since it’s even more volatile and fairly liquid. On the spike at the open I sold covered calls for a few of my clients who took assignments at on Friday. This was golden for them, but meant I had to wait for the excitement to cool some before I could get in even close to where I wanted for my naked puts. I also had to consider the email I received from Interactive Brokers last night – UCO is set to do a reverse split (1 for 4). This will apply to shareholders of record as of the close of the markets on February 24, 2011. The funds will trade at their post-split prices on February 25, 2011. Instead of targeting 10 contracts like I did last time I figured I needed the number to be divisible by four so I’d have “whole” contracts after the reverse split. While UCO was down to .59 after hitting .16 near the open, I sold eight UCO April naked puts at $content.60 each and received 4.28 after commissions.

I don’t consider this really a half position as much as a partial position. I might sell another four contracts (or one after the split) if UCO calms down soon. I want to have enough to be able to work a strangle again if I’m assigned shares. As bullish as I am long term on oil I don’t mind taking an assignment and then adding to it on further weakness. I feel oil will be much higher this summer and even higher than that within the next few years. UCO isn’t the best long term play on oil maybe because of its contagion issues, but it tends to work great when playing it for shorter periods and consistently reducing your cost with options. I didn’t aim any higher than the strike since I know my timing might not be ideal and think a 37% annualized return is plenty without taking more risk.

Before I got around to trading on UCO I started with VXX. I wanted to strike with volatility up this morning, but didn’t want to go in right at the open in case the drop caught some wind and got worse. I waited about 40 minutes and while VXX was trading at .20 I sold one VXX April covered call at .05 and received 4.29 after commissions. I timed this almost completely wrong as my trade came in about $content.10 above the low of the day (through 2:30). Just a few hours later VXX was almost .50 higher and above my strike. I’m not actually worried about this one though. I still have 200 shares long, two June puts long and two June calls short. I don’t see the strike calls coming into play and in the extremely remote chance VXX makes it back up to I’ll close my full position while I can still sell the puts for something. I think the more likely scenario is for VXX to ride this volatility wave for a few days, maybe a few weeks at the very most, and then start its decline again. I can see that happening even if the VIX climbs a little more. By April I expect my new covered call to be out of the money again with room to spare.

After getting my VXX option in place I moved on to JPM. I was kept out of JPM like I was with UCO until today. I’m a long term bull on JPM and reopened my position with an out of the money put just in case today’s correction has legs. While JPM was trading at .99 I sold one JPM April naked put at .47 and received 6.54 after commissions. I only sold one put to start with so I could work a strangle again if assigned like I did last time around. I’m also not sure how hard JPM is going to get hit in a new correction. The chart shows possible support at a trend line of higher highs that’s around .50 today and moving higher quickly. I see another horizontal line of support just below .50. If that holds it would be around my cost per share if assigned. I expect all the action to take place well before my April contract expires. If JPM breaks .50 for more than a day it could go all the way back down to the .50 range and if that happens I’ll be ready to load up with another put, possibly even before this first one is assigned. seems like a solid floor and an area I’d even consider adding a third put if we got that low. I’m getting way ahead of myself, but trying to stay realistic about how quickly JPM can move in either direction.

I’m also still considering selling naked puts on ABT, CVS and BA, but I’ve added enough for today. I have a busy day planned for tomorrow, so it might not be until Thursday before I can get back to it.

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Stock Investment :Options Expiration – February 2011

admin — Wed, 23 Feb 2011 13:36:38 +0000

Today ended up being an easy options expiration for my taxable portfolio. I only had three separate options expire today on VXX, VNQ and BA. This is how they each played out along with my next steps:

One VXX February 22 covered call – This worked like clockwork. I’m long

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Today ended up being an easy options expiration for my taxable portfolio. I only had three separate options expire today on VXX, VNQ and BA. This is how they each played out along with my next steps:

I’d love to see a dip on Monday for the market so I could squeeze in some orders at slightly better prices. My wash rule limitations on UCO and JPM are over after the weekend and I plan to get back in on both again. UCO has fallen back to where I’ll probably sell some puts at the same price where I exited with my covered calls last month. I’m basically starting right back where I was with one month of time value lost in my UCO addiction.

I’ve been taking smaller probability risks this year by selling longer term options and/or selling farther OTM. After being burned every year by one or two bad trades I’m trying to limit that risk this year and haven’t even been taking as many risks as I should. I’ve noticed I seem to be selling puts so that I always take a full profit on the option, but maybe I should aim for some that have a little more risk (and reward) and might only end with a partial profit or small loss. I hate to change to a different strategy until we get a correction. Since I’ve been light stepping this long it’s probably not the time to change without at least a decent dip in the market.

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Stocks Investments :Current Portfolio – February 11, 2011

admin — Wed, 23 Feb 2011 13:36:38 +0000

I’ve intentionally not traded this week. Since I’ve been selling so many longer term options lately I thought I should take a step back, let the dust settle and see how (a little) time affects my current portfolio. With volatility currently so low compared to the past

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I’ve intentionally not traded this week. Since I’ve been selling so many longer term options lately I thought I should take a step back, let the dust settle and see how (a little) time affects my current portfolio. With volatility currently so low compared to the past couple of years the option selling trades aren’t jumping off the screen for me, so I’m being patient or at least trying to be. I’m still entering orders, they just aren’t hitting yet since I’m pricing all of them for at least a little dip before they hit. I have one on MVV that expires today and isn’t close to hitting any more. I have another on UWM I just entered that is set to last through next Wednesday. I entered the order $content.25 above the last trade’s price along with a couple of my clients’ orders. Surprisingly, one of theirs hit instantly. The other two contracts are still up for sale and I wouldn’t be surprised if they don’t even hit by the time the order expires. Then again, a nice dip this afternoon or early next week is all it needs to bring the bid up to it.

I didn’t even realize it until I started writing this post and double checked my positions and saw that my BA covered call was assigned at .50 at the end of the day on Tuesday, 2/8/11. This one was kind of interesting because the week before I made this covered call trade we discussed it in the comments section of another post. I opted to aim higher with my strike than was being advised and now it looks like I should’ve gone even higher since BA is .00 above the covered call strike that was assigned and I missed out on the dividend too. The dividend wasn’t my goal as much as the premiums were (two puts and one covered call for 4.84 total). I still have one put set to expire worthless that’s out-of -the-money (OTM). I might get back in on BA when the April contracts are posted.

I’m still not fully invested like I planned to be by now, so next week I feel I’ll have to get off my tail and start ponying up for some more risk. For now, this is what’s in my Interactive Brokers account with a balance of 4,135.58:

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Stock Investment :Options Expiration – November 2010

admin — Fri, 26 Nov 2010 02:58:03 +0000

I had a good options expiration this November as most of my positions went my way. Here’s the breakdown of how everything finished for me.

SPY – 112 Straddle (sold 1 put and 1 call at 112) – My put finished well out of the money and which means my covered call

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I had a good options expiration this November as most of my positions went my way. Here’s the breakdown of how everything finished for me.

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Stock Investments :Options Expiration – October 2010

admin — Sat, 23 Oct 2010 09:41:54 +0000

I only have a few options expiring today with mixed results. The rest of my portfolio is weighted to November’s expiration. If nothing drastic happens in the next few trading days, I’ll start working towards building up my options for December’s expiration and

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I only have a few options expiring today with mixed results. The rest of my portfolio is weighted to November’s expiration. If nothing drastic happens in the next few trading days, I’ll start working towards building up my options for December’s expiration and move deeper into potential margin, all the while hoping that any correction is swift and causes the VIX (and VXX) to spike. On the other hand, a slow correction will give me time to chase my positions with new option legs. The way I see it (maybe with rose colored glasses) I’m in a good position right now to profit in either direction.

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Stock Market Investment :Bought BND and Charted VXX

admin — Wed, 22 Sep 2010 03:10:49 +0000

I mentioned in my end of the month summary this week that I sent in another ,000 to my TD Ameritrade account where I hold my long bond positions. Although I sent the funds in nearly a month ago I just had it sitting there in cash. I was waiting on a dip in bonds and [...]

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I mentioned in my end of the month summary this week that I sent in another ,000 to my TD Ameritrade account where I hold my long bond positions. Although I sent the funds in nearly a month ago I just had it sitting there in cash. I was waiting on a dip in bonds and on August 16th I placed a limit order for BND near the bottom of its trading channel.

Finally, this morning BND fell to start the day (now actually below its trading channel and very close to touching its 50 day moving average) and I bought 25 shares of BND at .97 and paid ,058.24 with commissions. Even though I missed the dividend earlier this week I still did better by waiting for BND to pull back some from its run up seen since I entered my limit order. This was a small buy, but I’m not trying to get rich off of this side of my investments. This is supposed to be the more stable side. The bond bubble could bust and I wouldn’t be hurt too much from such a small position, but it still moves me into a slightly better diversified allocation.

My next few deposits might be geared back to my Interactive Brokers (equities portion) account and then I’ll drop some more towards TD Ameritrade again later. I’m slowly working my way up to a 15% position in bonds. I’m up to 12% so far. Once I get to 15% I might I plan to let that sit for a little while and then might start inching my way towards 20%. Depending on how much my account is worth at that time I might be content to leave it at a 20% allocation for a while.

I was very tempted to sell new naked puts on VXX this morning too as it fell below .00. It’s touching the bottom of its trend line of lower lows and was within .50 of its low from the first half of this year where I expect support again. I decided against adding any more yet since I’m already so heavily invested in the single position and although the premiums are so inviting, the chance of a further decline from here isn’t worth the added risk if volatility continues to fall. At some point I’ll add more, but maybe not until I sell covered calls on the shares I appear to be destined to buy at the next options expiration.

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