xiv/vxx switch update switch signal is still long vxx, from 9/5 I have been in cash, may look at uvxy for a trade
trade tracks I added another corner, 6 corners of trading, stocks, bonds, currencies, commodities, volatility, real estate
THE OTHER SIDE OF OPTION TRADES Market makers (MMs) are who’s on the other side of an option trade. When you go into the market and buy or sell an option, it’s the MMs who sell or buy it from you. But unlike a typical trader, MMs don’t try to profit on direction. They profit on the erosion of the option premium. MMs construct their trades to be “delta neutral” – meaning their positions aren’t affected by a change in a stock’s price. They’re just looking to profit as the option value wastes away over time. In order to do this, MMs usually buy or short the underlying stock in order to neutralize the position. For example, if a bunch of traders rush in to buy call options on a stock right before its earnings announcement, MMs are the ones selling those call options to them. The traders are betting on the stock moving higher, and the MMs – having taken the other side of the trade – are betting on a move lower. The MMs would lose money if the stock rallied. Remember, though, that MMs don’t trade on direction. They need to neutralize the trade so they don’t lose money if the stock rallies. So they buy the underlying stock. Now, instead of a short call position, the MMs have some form of a covered call trade. This is a simplistic example, but it should help you understand some of the forces that are at work as a stock approaches its earnings announcement. Traders buy call or put options in order to speculate on the direction of the stock after an earnings announcement. MMs sell those options and then either buy or short the underlying stock in order to neutralize the position. If there’s enough volume behind this activity, it creates the possibility of a reversal trade once the earnings announcement is out of the way. If the stock gaps higher, traders who bought call options are going to be liquidating their positions and taking profits. On the other side of those trades are the MMs, who buy the call options back and then liquidate their shares. The combination of traders selling their call options and MMs selling their shares creates selling pressure on the stock. And if the right conditions exist – which is what my system identifies – then a stock that initially gapped higher in response to an earnings announcement may reverse and turn back lower on the day.
xiv/vxx switch update switch signal is still long vxx, from 9/5 I have been in cash, may look at uvxy for a trade
My strategy VIXTrader Professional holding now XIV and achieved in the last 12 months more than 130% with a very low DD..