Shorting UVXY
- Thread starter dcwriter2
- Start date
I make a little money buying puts on inverse ETFs like SQQQ. SQQQ has decent volume and is pretty predictable. Shorting using stock is too dang dangerous for me and unnecessary imho. Don't take my word for it. At current prices it is also a cheap trade to try. Give it a whirl.
I buy near money puts with at least 14 DTE. Look for a 30% to 50% gain. Best timing is to wait for a bit of a rise. It will soon enough start down again. It is best not to do this during the beginning of high volatility. Have some patience until it starts to die down. Sell if your put loses more than 50% of it's value before you get your gain. It is very easy to try this on paper. Not the same as real trading of course, but you can at least see if it is worth your while to pursue.
I buy near money puts with at least 14 DTE. Look for a 30% to 50% gain. Best timing is to wait for a bit of a rise. It will soon enough start down again. It is best not to do this during the beginning of high volatility. Have some patience until it starts to die down. Sell if your put loses more than 50% of it's value before you get your gain. It is very easy to try this on paper. Not the same as real trading of course, but you can at least see if it is worth your while to pursue.
Nube question if i may,
How does one determine "during the beginning of high volatility"
What do you look at?
VIX shooting up 30%-50% and continuing to rise, or at least staying there for a few days. This often starts high volatility regime, though not always. Otherwise VIX often drops down fast.
But VIX is just a reflection of SPX option pricing, so the above may be equivalent to SPX dropping substantially and not recovering. You could get similar returns trading SPX puts instead of UVXY/VXX.
Yeah like guru said, and if you get a few much larger than normal daily bars, which of course means SP500 is dropping fast, then you might want to wait to get in. Look back a year or so at the daily graph. No, you can't really predict what it will do, but like they say history might not repeat, but it can rhyme. The great thing about this is you only can lose the cost of the put. Sure it can be 100% if you let it, but that still is a small amount compared to what can happen with short shares. Note that your losses can be much greater if you foolishly let the put expire ITM and it gets auto-exercised.
I hesitate to say this but my trades of this type are always multi-part. I may "average in" up to about three times. Think of it as "getting a good price."
I think it is fine as a tested method of trading. But if you get in to gambling, revenge trading, or "gee it just HAS to start going my way after I average in 10 times, etc" stuff then you deserve to blow your account.
I hesitate to say this but my trades of this type are always multi-part. I may "average in" up to about three times. Think of it as "getting a good price."
I think it is fine as a tested method of trading. But if you get in to gambling, revenge trading, or "gee it just HAS to start going my way after I average in 10 times, etc" stuff then you deserve to blow your account.