10 years of Futility … Will Pay Off for You

Yo Pit Crazies,


Yes, it has been 10 years …


… of Futility for the ProShares Ultra VIX Short Term VIX ETN (Ticker: UVXY)


It is horrible!


It dropped 7% on Thursday alone, a day after its reverse split.


The VIX itself only dropped .62 points. What gives?


Mark will talk about this Tuesday — and reveal three incredible trades — I will talk about it today!


I filled in for Mark on the Robinhood Trader Turbo Trade session yesterday,  and UVXY was so not-hot that Mark put it into the Robinhood trade log.


He paid $2.00 for the UVXY June 04 36.5-strike puts and was trying to close them at $3 into the close. I used this Edge Hunter Vol Dashboard tool to explain the issue.


Put on your Vol Geek hat, cuz we goin’ deep!



Edge Hunter Pro Vol Dashboard with UVXY shocked lower and a 1-point drop in the VIX futures curve.


Note that when I lower the VIX futures, in the dark blue column, UVXY’s share price drops from $35.27 to $33. 


Also note, the decay roll yield is $.35 per day. That means under current conditions, UVXY will rot .$35 per day, every day, or around 5% per week.


That. Is. Not. A. Good. Product.


It IS, however, a reliably crappy product


However if VIX jumps into backwardation everything will run in reverse. 

But that’s not what’s happening here — and only Mark Sebastian has a three-trade attack.


The Lesson: Know your product and let Mark help take you over the top.


The Rundown
There were a crazy number of good closes yesterday. I am tired!


Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle trading vehicle. The goal is to teach students the best times to buy options.


Ford (Ticker: F) ripped up Thursday so I sold the call side of the strangle for more than 100% gain, while the strangle overall was up 33%. I rolled into a risk-reversal, long call and short put, that some of the Trading Legion Roomies wanted in the first place yesterday.


Pro Trading Room:
This is Option Pit’s live access to Mark and myself during trading hours. Our Pro students post trade ideas with Mark and me during the entire trading session. 


The tone was mostly bullish this week as things progressed.


Some “squeezy” trade Ideas:


      • Rocket Mortgage (Ticker: RKT) might be another squeeze, so RKT May 28/June 04 20.5-/18.5-strike call diagonal for $.60. That is long the June 04 18.5s and short the May 28 20s.
      • Mark posted the AMC Entertainment (Ticker: AMC) June 04 25/32/39 call butterfly for $.75
      • A trade from Roomie Cat: Buy-to-open Cleveland-Cliffs (Ticker: CLF) July 16 20-strike calls @ $2.02. 


The Power Moves Portfolio:
Frank Gregory and I run a portfolio approach to trading options with stocks that have good long-term prospects based on Frank’s K Street knowledge and my options expertise. We are aiming for positive theta trades and using that income to buy calls is the big growth opportunity.


Here’s the latest …


      • Ford (Ticker: F) is off to the races. Recall, we closed the diagonal call spread, took the profits we made and bought the F June 18 14.5-strike calls and June 18 13-strike puts.  The second trade is up about $.32 or 50% and I will ride it since we own it for a credit.
      • General Electric Company (Ticker: GE) is a play on green energy. We owned the GE June 04 14-strike calls for a $.16 credit and sold them yesterday for $.36. So that’s a 52% gain. I took the dollars I made and bought 2 GE Sept. 17 14-calls. Ride’em, cowboy!

Edge Hunter VBS sheet showing September cycle calls. GE September cycle is still relatively inexpensive (BLUE).

      • Cleveland Cliffs (Ticker: CLF) broke out and way above the strike in my spread, so I took the $100 gain and bought a midterm call — one CLF July 16 21-strike call for $1.61. The commodity stocks are making a big comeback and I want to ride them higher.
      • Our Vale S.A. (Ticker: VALE) position is down a bit in the five VALE June 18 22-strike calls we own, but it’s closing in again on even. We sold all the puts for a 100% return per put.  I would have preferred to buy stock against my puts, but VALE did not get low enough — well below $20 — so I will ride the calls another week, but then look to exit or hopefully roll if there is an opportunity.
      • We own four Taiwan Semiconductor (Ticker: TSM) June 18 120-strike calls for $3.10 and one TSM June 18 100-strike put for $1.95 and have taken in $470 against them via TSM calls we sold and QQQ put spreads we closed. The calls are back to $1.50, but I would just take even here and move on. The $108 level is a great bounce area for those wishing to play in this sandbox.
      • Palantir (Ticker: PLTR) stock is up and nicely profitable, so I will just hold things and roll my stock to long-term calls to stretch out the June 18 17-strike puts. I own two puts for each 100 shares of stock, and I never got good enough prices to close the puts.

Power Moves Portfolio Starting Lineup
The portfolio’s current open positions:

Volatility Edge/Volatility Trading Club:

The Option Pit VIX Light is still yellow. Volatility is still very bouncy, so the yellow light remains amarillo. We also have some BIG news coming soon on the UVXY reverse split. So stay tuned there.


      • Vol Edge closed part of Trade No. 90, which was VIX June 16 17-strike puts bought for .25, at .55 — for more than 100% profit.
      • I bought another strangle, VTC Trade No. 247, this time buying the VIX June 16 19-strike puts for $1.25 and the VIX June 16 23/33.5 call spread for $1.  The strangle is trading $2.55 on the close for a 10% gain as of now.
      • I own five VIX June 16 30/45/60-strike call butterflies and three VIX June 16 20-strike puts. This position is up around 15% and I can close all the puts remaining and own the calls flies for a credit which is the goal.


Remember, a lot of vol strategies I use are market neutral. That means whether SPX or VIX go up or down, the positions still make money. This is a technique you can learn in the Volatility Trading Club and Volatility Edge!


To Your Trading Success,



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