So, in case you forgot I am loooooong the VIX. And today it was crushed. I am not going to go off on a rant about who is doing this, for like the 23rd time. It is time to adjust them.
I own the following:
Sept 45Calls - paid 1.31, worth .80
Sept 35Calls - paid 2.55, worth 1.80
Sept 30Calls - paid 1.80, worth 1.15
October 50Calls - paid 1.30, worth .70
Sept 45Calls - sell for .80 or better AND WAIT - On the next VIX Spike, I am buying Sept $2 PUTS on the UVIX. Currently the UVIX is at 7.79 and on average, it loses about 11% each month. (See Below) The goal is to use the decay of the UVIX to my advantage while Whomever continues to hammer the VIX.
Sept 30Calls - sell for 1.80 or better AND ROLL to JAN38s or 37s for 1.80 or better.
Sept 35Calls - sell for 1.15 or better AND Oct 50Calls for .70 or better AND ROLL to DEC 33Calls for 1.90 or better.
It appears the "Whomever" wants the VIX at Covid levels, around 12. I have written thousands of words why this is but to simplify it remember this:
VIX DOWN = OIL DOWN
VIX DOWN = STOCKS UP
Ok, so if Whomever wants to continue to F around with the VIX, and they can do so for years, then I intend to make money off of it.
Buy PUTS on the UVIX.
The UVIX is a slow death march.
The UVIX is an ETF that is 2 times the movement of the VIX. But, the VIX is based off of SPX puts and the UVIX is composed of SP FUTURES.
Here's what's important: the puts that the VIX is based off of are 30 and 60 days out. The futures that the UVIX is based off of are adjusted every single day AND futures suffer worse theta decay than options.
Because of this, the UVIX declines around 75% of the time due to contango (see below). But when there is a spike in volatility, the UVIX can spike significantly more dramatically. One final note: the UVIX price is artificially supported legally by "Authorized Parties" or dealers that are allowed to go into the market and support it every day.
Here's a chart of the UVIX.
I will roll out my duration on my long VIX calls - now - because they are cheap and if the VIX continues to fall, the shorter duration ones I own now will decay faster than the longer duration ones I am swapping for and at the same time, on a VIX spike to 18-20, I will add the UVIX puts.
That means at some point, I will be both long and short the VIX. BUT, the VIX short vehicle declines in value at a roughly 2x inverse + decay to the long VIX calls.
TIME will be in my favor on the short side, the longer it takes for the VIX to spike, the more the short position will profit.
If I only owned a couple long VIX calls, I would roll them to either the Decs or the Jans.
I am watching the price of oil closely. I really wish that todays smashing had waited until the OPEC meeting was over. But such is life.
If oil starts moving up, and I mean over a week, AND OPEC finally goes to war with the US over the price of oil, then the VIX should break free.
OPEC is not allowing any Western newspapers into the pressers before and after the meeting - they are pissed. If OPEC announces a round of planned cuts, then to me that means they are ready to go. Remember the Saudis need oil at $80 to keep their country running and stable.
Contango is when the spot price, or today's price, is lower than the future price. In terms of the UVIX, since it is in contango most of the time, which makes sense by the way when you think about it, the value of the UVIX will keep dropping, every single day.
If this appears to be complicated, it is, but not purposefully so. I have said that I do not know when the spike will occur. And it is even more apparent today that the FED is blatantly hammering the VIX and oil. They WILL lose control of this at some point and I intend to be in the game and in position to profit.
Investing is not binary - it is not go long only or go short only. You have seen this already from my recent trades.
Investing requires you to put to the side what you think SHOULD happen with what is happening, and position yourself accordingly. Rolling bought me 3-4 more months for the FED to screw up.