This journal will discuss BUYING PUTS on UVXY because it goes down basically all months on average. Sometimes it goes up. But this infrequently will be higher at the end of any 3 month period than it was preceding the 3 month period. Based on this, I assume buying puts at least 3 months out will build funds. Let's try it. I started a few days ago. I bought a February 17 9 put for $1.32. Check today's chart:
I suspect you're going to get a lot of feedback on this from Ken Calhoun, but I will not see it because he has me on block, because he is a coward and will not post his UVXY losses. Basically, do not listen to anything he may type here, because he is fake.
My goodness!! It is in a comatose state. And it will continue to be in a comatose state for many weeks/months/years ... until ...
You are placing a long-term bet that UVXY will decline in price, and your put will then gain in value. There are many problems with this strategy. I'm sure you're aware that UVXY responds to volatility. But not in a way that's going to be of help to you if you're holding puts 90 days out. Because if UVXY declines, it is generally a result of volatility decreasing, not increasing. So you can be correct in your assumption that UVXY, over time, will decrease in price. (A characteristic that levered ETFs share.) But the volatility component of your option will also decrease, draining your option value. To this, add your transaction costs and time decay that will erode value, and the odds are great that you won't be seeing profits at expiration.
Well, there are a few things I have learned about options. 1) is that I'm pretty much the worst options trader. 2) Reddit has told me that options should never be held until expiration. From what I grasped, theta starts to decay around 60-90 days til expiration. So maybe it makes sense to sell an option before then. About the levered ETFs you mention, do those decrease in price overall, or only relative to their index? UDOW doesn't seem to "decrease over time" but it might compared to DIA. By levered I assume you mean leveraged. Unless you meant inverse. I heard those decay over time too, but I think it's relative to the underlying.
I give you credit for trying, but unfortunately this won't work. Options will be repriced to remove any edge, even if one temporarily appears. You'll be overpaying for those puts, and once UVXY stabilizes or pops for a longer time, you'll be stuck with expensive and decaying premium. Possibly a "better" approach may be to buy put spreads 6-12 weeks out near ITM, which would also give you very measurable reward-to-risk, for example making 33% on your bet ($0.50 on $2 spread costing $1.50, for example). But this too, is in danger of UVXY popping, as well as VIX regime changes and VIX backwardation.
I'm wondering if I should go 6 months out rather than 3 months out. Six months out gives 3 months of movement before the 3 month time decay begins. The concept is that in any given 3 month period, UVXY will end lower than currently -- except starting in Apr 2022 when it was slightly higher 3 months later. So I don't want the options to expire, I want to sell them earlier. Six month options give 3 months to go wherever and then keep most of the time. Except the spreads kind of stink.
Don’t know, as none of these strategies/periods show as profitable in my tests. Shorter periods and spreads may be just less unprofitable Spreads may look like they stink but they’re probably much better. One guy on Twitter quadrupled his account in 2017 trading only VXX and UVXY put spreads, putting most of his money into the spreads and making 30% every 6 weeks. That’s huge money, with no equivalent strategy in sight. Although he stopped in early 2018, otherwise he’d lose it all in 2018. Or so the story goes. But, what really may work much better is simply buying and holding SVIX shares, or buying SVIX calls, or call spreads, even LEAPs. People made millions investing in SVXY before 2018. The only reason why SVXY and XIV (SVIX predecessors) blew up in 2018 is that VIX doubled within couple days from 14 to 30. As long as we’re not in danger of this, and we’re not when VIX is already high and decaying, then SVIX is safe.