S&P Prediction

[sour grapes]

sell some calls now on the vix position,i just sold the july 15s for 1.50. on half my position on a hedge of the portfolio.

[sour grapes]

just to clarify the calls are for vxx.

[ReplayRandall]

Crickets.....That's right, nothing but crickets.

[PaceAdvantage]

Originally Posted by ReplayRandall

Crickets.....That's right, nothing but crickets.

I'm not sure what you're getting all excited about...

[ReplayRandall]

Originally Posted by PaceAdvantage

I'm not sure what you're getting all excited about...

Read post #24, then look at the Market close......Just warming up..

[PaceAdvantage]

Originally Posted by ReplayRandall

Read post #24, then look at the Market close......Just warming up..

The run up has been so massive the past many years, you're gonna need a real hefty drop in order to crow IMO.

Today was not even a drop in the proverbial bucket...but it was a long time coming...been opening shorts for days now waiting to catch something like this.

[ReplayRandall]

Originally Posted by PaceAdvantage

The run up has been so massive the past many years, you're gonna need a real hefty drop in order to crow IMO.

Today was not even a drop in the proverbial bucket...but it was a long time coming...been opening shorts for days now waiting to catch something like this.

As you know from past PM's I've sent you, I don't bust people's chops when the Market was in a steep dive in the past......I don't "crow", Mr. All-World Handicapping god that you are..

[whodoyoulike]

Originally Posted by PaceAdvantage

The run up has been so massive the past many years, you're gonna need a real hefty drop in order to crow IMO.

Today was not even a drop in the proverbial bucket...but it was a long time coming...been opening shorts for days now waiting to catch something like this.

What do you mean?

Have you been shorting using Vix and then covering each time before day's end?

Or, have you been following thread?

[PaceAdvantage]

Originally Posted by whodoyoulike

What do you mean?

Have you been shorting using Vix and then covering each time before day's end?

Or, have you been following thread?

I've had lots of shorts triggered in the S&P emini futures...they were all losers until today...I usually average 1 trade every couple of days...I've had 1 short going in 4 of the past 5 trading days...usually I ended up shorting right before the market turned back around...not today...

Maybe I'll start posting my trades next, after I top posting my horse picks

[PaceAdvantage]

Originally Posted by ReplayRandall

Mr. All-World Handicapping god that you are..

That part you got right, at least...

[highnote]

Originally Posted by ReplayRandall

Then you'd better "Heavy-up" on your options, the bond market is about to go south thanks to Fed's bond dump off it's balance sheets, stocks will fall right behind......Sign, sign, everywhere a sign.

The swiss central bank holds $129 billion in U.S. equities.

These big players will probably come in and start buying at the first sign of selling in order to prevent a loss.

But if they don't then it might be a good time for small players to sell while the market is still near all-time highs? Or at least insure your portfolios.

Remember -- sell in May and then go away. That is a Wall Street maxim for a reason.

I bought 500 shares of the VIXY ETF for $11.79 and put in an order to sell 5 deep-in-the-money VIXY September 15 call option contracts with a strike price of $5 for $8.40. My order was triggered today when VIXY hit $13.41 at the close.

The cost of the VIXY was $11.79 x 500 shares = $5,895

I collected 5 * $8.40 = $4,200 on the sale of the calls.

My net cost was 5895-4200=$1,695.

The trade can lock in a 140% annualized gain after commissions of about $0.03 per share as long as the VIXY stays above $5 by Sept 15. It can rise to infinity and the trade will still make 140% annualized. It can fall as low as $3.39 before the investment starts losing money.

If VIXY falls to $5 at the September 15 expiration date the options will expire worthless and I will keep the $4,200 for which I sold them. I would lose $6.79 * 500 shares = $3,395. The net profit for the 4 months would be 4200-3395= $805 on a $1,695 investment or 47% -- which is about 144% annualized (not including commissions).

I probably could have rolled the dice and not bought covered calls and just played the VIXY long which would be a pretty safe bet since I bought it when the VIX was near an all-time low, but I like to limit my downside risk while having a very high probability of more than doubling my investment on an annualized basis.

If the VIXY shares get called away there will still be a nice profit.

If I had been paying attention today I would have raised my asking price to $9 or maybe even $10 or perhaps even looked at other stike prices. It's hard to work a day job and trade effectively.

[AltonKelsey]

Kind of a curious trade. You realize you were the only one to trade that option today, right?

And I think you probably sold it AFTER the underyling moved much higher. correct me if I'm wrong, so you could have just sold the VIXY outright and made a nice gain.

From the way that thing trades the chance of it going to 3 and change within 4 months isn't all that trivial.

Interesting gamble though.

[highnote]

Originally Posted by AltonKelsey

Kind of a curious trade. You realize you were the only one to trade that option today, right?

And I think you probably sold it AFTER the underyling moved much higher. correct me if I'm wrong, so you could have just sold the VIXY outright and made a nice gain.

From the way that thing trades the chance of it going to 3 and change within 4 months isn't all that trivial.

Interesting gamble though.

You are correct on everything you said.

I was incredibly busy at work today and never got a chance to check prices. Had I checked I would have either raised my asking price on the options or canceled the order. Then I would have had to decide if I wanted to sell my shares at a quick, one week, 20% profit. Off the top of my head, I don't know how much that is annualized, but it's a lot.

I set up the trade because I felt strongly VIXY would go higher, but I also knew it might fall again. So why not lock in an almost guaranteed return of 140% with very little downside risk. What is the chance that VIXY falls from $13.41 to below $3.39 by September 15? Maybe 1%? Probably less. But you say it isn't trivial. So maybe there downside risk is greater than I assumed? If so, then I feel better about my trade compared to just holding the VIXY long.

I knew the VIXY would eventually rise, but when? What if summer saw as much low volatility as we've seen the past two months? I'd have been sitting on 500 shares of VIXY and broke even or maybe even have lost.

Since I worked until midnight, I would have had to come home and put in a sell order for the morning. What if the VIXY falls back to where I bought it? It could also rise more. Who knows?

There is always a tradeoff between risk and return -- growth versus security.

[highnote]

Originally Posted by AltonKelsey

Kind of a curious trade. You realize you were the only one to trade that option today, right?

And I think you probably sold it AFTER the underyling moved much higher. correct me if I'm wrong, so you could have just sold the VIXY outright and made a nice gain.

From the way that thing trades the chance of it going to 3 and change within 4 months isn't all that trivial.

Interesting gamble though.

I made a lot of these deep-in-the-money trades back in mid 2009. I ended up making over 20% on average. I would have made more, but I made a couple of mistakes because I had never done them before.

I sold a lot of deep-in-the-money calls on GE and Bank of America. The option premium was incredible because everyone thought the world was going to end.

[AltonKelsey]

Well, I hate to tell you, you didn't lock in anything by putting your sell out there at 8.40. That wasn't a simultaneous trade.

If the option doesn't fill, (and the only reason it did it it was picked off cheap) you have all the risk to the downside.

I think you would be much better off trading out of the thing than fooling with selling an option where you got almost no premium.