Yo Pit Crazies,

If you missed my UVIX tutorial, you can still catch it but the sweet deal is gone. There is a lot of runway left in UVIX for those interested in learning the vol products.

Well two days in a row the VolShares 2x VIX futures ETF (Ticker: UVIX) tickled $34 only to retreat by midday. You see, this product is literally nuts. It moves! I have to admit it was not convenient for my big reveal at 11 am on Thursday. As you can see, that was on the low end for UVIX for the day.

That is why I hedge. The bond auction went terrible and the SPX was down…64% by the end of the day. Note that UVIX can drop as fast as it pops.

UVIX 1 day chart with 1 min candles

Time to talk about the hedge

UVIX is subject to a Vol Event at any time

I define a Vol Event when I see the VIX change zones on the upside. Right now VIX is in Zone 2 which is 13-18. VIX spends 50% of its time below 18. VIX touched just above 18 today before retreating to mid-16. For a brief moment, VIX was ready to get to the next Zone but could not hold up. The resulting end of the day move was just an 8% volatility.

This was the trade idea. Some of my savvy Pro students paid only 1.60 for the UVIX puts, down to 1.40 if you can believe it. This created great profit opportunities for our Trading Desk members.

3 UVIX Nov17 25 puts for 2.20  FILL THIS FIRST 2.25-2.30

1 SPY Dec15 429/419 put spread for 2.20 2.25

That is where I find myself since I have a SPY put hedge, which if SPX drops to 4200, I should easily cover 70% of UVIX puts cost, and I will close it. That is the risk I assign to the trade this size, or about $200 (And I trade this amount so you guys can relate to the trades – trading $20-$50k is exciting but for our purposes with teaching new traders and finding easy trades… 100s work). I do assume I can sell the UVIX puts for something, but that is not always the case in a big Vol Event.

 Some of my Trading Desk students also have some VIX Oct18 21 calls kicking around which I and they, own for small credits.

If the bond scare does not take hold, expect UVIX to breach $29 on the downside again by the close Friday. That’s the number to watch (https://finance.yahoo.com/quote/UVIX)

To Your Trading Success,

AG

P.S. if you missed the presentation yesterday on how to break this trade down and what it means for the next year or even more – click here. If you want to join us – call at this (888) 872 3301 number and we’ll get you the best deal possible.