A time has come to put money where the mouth is. The plan was first described a month ago here https://yourdotcapital.wordpress.com/2016/10/09/trade-presidential-election/
A lot has happened during past two weeks:
- VIX has nearly doubled from 12 to 23.
- VIX rose on 9 consecutive days in a row – something that is unprecedented in its short 24 year lifespan.
- Market expressed very clearly that it is “with HER” and does not want to make America great again.
Rising volatility was great for the plan. That is until the director of FBI announced on Sunday after examining 650 thousand emails (1 email per second) found on some wiener’s laptop that Hillary Clinton is exactly as dirty as before!
Which in America means she won’t have to run the country from jail cell. Which the market liked very much. And the volatility collapsed. Damn.
Still… on with the plan. I chose UVXY as the underlying for shorting volatility. Just because it’s the worst ever vehicle for going long on volatility. And this means it’s the best for shorting it for the short term. The reasons for that have been blogged thoroughly. For example here.
Your.Capital found the best risk:reward ratio for shorting UVXY for next 39 days (December 2016 monthlies) to be a very simple combo:
short 3 CALLs (strike 20)
long 1 PUT (strike 13)
(by the time you look at this link the market data has already changed and so has the best combination along with it)
Of course it is not a standard textbook option strategy – it almost never is. Custom combinations offer much better risk:reward than anything you can learn online (or from some book). Btw, at the time of taking the position UVXY had short sales restriction.
Why is Your.Capital’s position so much better than buying puts (or anything else for that matter) needs more explaining. I’ll link it somewhere here (after i have written a post).
So (the one lot of) the combination looks like this with the real prices i got orders filled with:
I kept the initial position small for three reasons:
- because money&risk management.
- volatility has already come down from lofty levels (thanks FBI).
- maybe, just maybe… if Trump wins… there will be some short term volatility spike and i could add to the position with much better prices.
Now it’s just waiting. There will be third post coming up during christmas holidays. A final checkup on profits and losses.
PS: that lizard had a really bad day – Run, Vix, run!
PPS: don’t watch if you are afraid of snakes.