The VIX Light Is Yellow (Barely): Volatility Will Move.
Hey Traders,
Wednesday is the day!
ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) is reverse splitting …
This is HUGE news …
Now that UVXY is going to have real value again …
I can start to trade options on it!
Here is what is going to happen …
On Wednesday morning, UVXY had a 10-to-1 reverse split.
For context, the UVXY is an ETF that tracks a levered long VIX portfolio: iPath Series B S&P 500 VIX Short Term Futures ETN (Ticker: VXX).
In other words, for every 1% move of the VXX, UVXY moves 1.5% (because it is leveraged).
And this reverse split meant that UVXY opened on Wednesday around the $40 mark … Up from just $4 on Tuesday …
But it’s now currently trading closer to $38 …
Yes, it loses money THAT quickly, people.
I’m going to start trading it as soon as I can …
But sadly, they don’t list UVXY options until Thursday.
Ahead of that, there is some UVXY housekeeping to be done …
- Make sure I close all my old UVXY positions. The old UVXY options, which are based on the old number of shares (10 times the current amount of shares!), are going to become SUPER illiquid once they list new options.
- Check out the new daily decay: Remember, I have a VIX decay calculator in my Edge Hunter sheets. I need to review what the decay looked like before, and how much VXY is now bleeding.
- Consult the Option Pit VIX Light: I think there is a strong chance the traffic light goes red tomorrow, indicating that volatility is falling. This gives me the all clear to be short UVXY (which, remember, is based on short-term VIX futures). However, if the Option Pit VIX Light remains yellow, I may need to change my approach.
- Build a trade: How do I build a trade on UVXY? That’s something my Volatility Edge clients will get to check out on Tuesday … I’ll give you guys some hints of what I’m trading later on next week though …
If you aren’t a Volatility Edge client yet … Good news.
I’m opening up my Volatility Edge program to new members.
That means, you’ll receive access to next week’s live trading session …
Plus my THREE UVXY trades …
And all of the other incredible features of my Volatility Edge program:
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- One year of access to my weekly volatility trades.
- My exact entries and exits texted to you directly.
- A live session with me EVERY Monday at 12:00 pm ET (Don't worry, I record it if you’re busy!).
- Option Pit’s custom volatility courses — the VIX Primer and Volatility Primer (each normally retail at $997!).
- PLUS, again, this special session on Tuesday.
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This is going to be big, and I want to make sure you’re able to take advantage of this market phenomenon.
Click here if you’re interested.
When UVXY reverse splits, it’s a rare opportunity to really pull in some profits in a short period of time.
Plus, it acts like a weight around the necks of other volatility products, so I can’t ignore the VXX or VIX, either.
The next week is going to be incredibly fun, and it’s going to present me with some incredible trades. It should be one of my best days trading volatility that I’ve had all year …
It’s that great.
Hopefully, you’ll be joining me on Tuesday,
Your Only Option
Mark Sebastian