Yo Pit Crazies,

If you have not caught Griff and his Heavy Metal Madness check out his video here on what to expect in the 4th quarter.

The normal stock split is 2 for 1.  That means I get 2 shares for everyone I own and the stock price gets cut in half.  Generally, the market has always viewed this as bullish and a reason to pile into a stock.  I think half of Tesla Inc.’s (Ticker: TSLA) gains came after the company announced a stock split and everyone piled on.  The truth of the matter is that nothing material happens to the company, there are just more shares lying around for less money but the net is the same.

A reverse split is different from a normal stock split, the price of the stock goes up, but the number of shares is reduced.  This type of split is known as gamma killer because the strikes move farther away from the money on fewer shares.  Since there is a square in the gamma calculation the gamma of the positions goes away.  It is like the options die.

UVIX 1-month chart with 1-day candles

The 2x Long VIX futures ETF (Ticker: UVIX) is going to go through a 1 for 10 split on Oct 11th.  That presents its own set of fun.

UVIX has a long history of reverse splits

While UVIX is a relatively young vol ETF,  it already has a history of reverse splits.  Last year UVIX was $70 and now it is around $3.  Long Vol ETFs buy futures and those are decaying assets most of the time.  It is like owning decaying options and waiting for something to happen. That is the life of UVIX.  Note recently that UVIX had a move of $2.60 to near $4.00 so in percentage terms it can take off when VIX jumps like we got this last week.  VIX futures were up 20% in dollar terms and UVIX is somewhere around twice that.

Once it splits 1 for 10 a $30.00 UVIX gets more enticing with $10 to $15 potential moves on a VIX pop.  Mark and I will go live around Oct 11th to discuss the ways to jump on this great opportunity.

Not all reverse splits are trash as long as there is a way to trade them.  We will discuss this also in the Trading Desk so if you want a sneak peak, sign up for the best vol trading service on the planet.

To your trading success,

AG