I've successfully shorted UVXY in a variety of ways, but I am coming to the opinion that the safest and also one of the highest returns from a short UVXY trade come from buying a UVXY LEAPS put contract and slowly whittling it down with weekly OTM 0.05 short puts over 2 1/4 years, getting close to free trades in some cases. But, return-wise, is it better to start out deep ITM, ATM or OTM? Any studies on this? Thoughts? Caveats?
Long UVXY LEAPS puts question
- Thread starter SoCalOptionsWriter
- Start date
IMHO: The extreme lofty premiums of those PUTs makes holding them for long term unattractive. Selling a weekly PUT would have too high a likelihood of being challenged to make a nickel seem that worthwhile. Have you looked into shorter term (under 100 days) call credit spreads for swing trading the spikes? (you may benefit slightly {perhaps too slight} from the higher iv, instead of being beaten heavily about the head and shoulders by it) 
BTW: How was Lisbon?
BTW: How was Lisbon?Greetings again. Yes, Lisbon was quite nice, very calm, civilized, safe, and friendly; I don't care much for the local cuisine, however, and as for culture it is not London or Paris. But it was still nice. Almost perfect weather every day. Probably what LA was like in the 50s. The real estate prices in Portugal are very tempting, I must say, and we met Californians over there that have made the move, but just not sure I can talk my wife into it. We'll see.
As to my latest UVXY project, I'm looking to compare Long OTM, ATM, and ITM LEAP puts, hedged with 10 nickle puts expiring every two weeks, and see which has the best return on margin, and then compare that with short 100 shares, black swan hedged with an OTM call, and also with the popular ITM, ATM and OTM call credit spreads. I was going to backtest but then thought, nah, just go ahead and do the trades with money, as they are not large positions. I was going to start when the LEAPs come out later this month, but now I think I will wait until after the next reverse split, so I'm not dealing with funky low liquidity post-split contracts. Thoughts? I have a feeling the margin on the UVXY put hedges will kill the return because UVXY is not a margin-able product, with my broker at least.
As to my latest UVXY project, I'm looking to compare Long OTM, ATM, and ITM LEAP puts, hedged with 10 nickle puts expiring every two weeks, and see which has the best return on margin, and then compare that with short 100 shares, black swan hedged with an OTM call, and also with the popular ITM, ATM and OTM call credit spreads. I was going to backtest but then thought, nah, just go ahead and do the trades with money, as they are not large positions. I was going to start when the LEAPs come out later this month, but now I think I will wait until after the next reverse split, so I'm not dealing with funky low liquidity post-split contracts. Thoughts? I have a feeling the margin on the UVXY put hedges will kill the return because UVXY is not a margin-able product, with my broker at least.
I tried a few variations of hedging with mixed results and decided typical hedging was not for me. I find betting against myself (hedging in opposite direction of my trade) confusing and illogical. I now neutralize or partially reverse my position when the "fit hits the shan", and this is a temporary shift only. This is working for me so far. I lost interest in the search for efficient hedging.