for 2017 went live with a vol switch trade strategy that I had been working on for about 2 years. in Jan 2017,opened an account with about $500 to get it started. the account ended the year of 2017 at $1,613.28. I have thinking about what to do going into 2018, take some money out, add more, decided to let the account keep going as it is, so I am holding 12 shares of XIV.
well, so much for that big sell off to start 2018 most were predicting, cheeseburgers devoured, next batch getting ready for the grille....
vol switch trade want emphasize that when trading vol related products, it is possible to have sudden, severe losses, that could be up to 50% of a position. you either need a hedge to offset the loss, or a plan to recover from the loss, or both.
vol switch trade signals used to switch mainly derived from the following, action of stock indexs, positive action, stay short vol junk and hiyield bond etfs, positve action, stay short vol contango/backwardation, ( structure, M1, M2}, contango, stay short vol Thinking being that as long as stock traders are satisfied with market action, they will also look to junk and hi-yield bonds, and have little need for protection, once they become concerned, they will get stock index put protection and vix will rise. So we would be short vol, with XIV, until a switch signal called for exit of XIV, and go to cash. Again, want emphasize that when trading vol related products, such as XIV, it is possible to have sudden, severe losses, that could be up to 50% of a position. Either need a hedge to offset the loss, or a plan to recover from the loss, or both.
January is proving that it can be a rough trading month, lots of option related movement and big player repositioning.
3 trades made today, Jan 25, Thu AAPL, BTO, feb/2, 175 call $2.44 AAPL, BTO, Feb/2, 180 call $1.16 plan to close these the day before e/r, e/r is Feb 1 QQQ, BTO, Feb/9, 170 call $1.57
SVXY, March seasonality is strong, checking the option tables, looks like some one may have made the following trade, Bull put credit spread, Apr/20, 120/125 put spread, $1.98 Cr, risk, $3.02, possible return, 66% there was also some volume in the following Apr/20 OTM call strikes, could have been been some spreads, not sure, 130 call, 133 call, 134 call, 135 call
some thughts for week 2 of FEB week 2 option expiry week is the "pit bull low" week gov funding thurs will be on the menu, check out predictit dot org watch the 10 yr rate, moving in on 3%??? traders almanac says fri low? mon low!, see how that goes
follow up to trades made, Jan 25, Thu, AAPL, BTO, feb/2, 175 call $2.44 AAPL, BTO, Feb/2, 180 call $1.16 plan to close these the day before e/r, e/r is Feb 1 max loss on these calls, trade went bad right from the start, looking at a trade set up I also follow, should not have put this trade on. next time will factor it in. also decided to not close before e/r and hold through in case of move up, that did not happen, so it was a total loss.