Also, that late night when we were going back and forth - not sure if you saw this post from our friend. Or is this also a complete waste of time and going down the wrong road?
"I don't disagree with much of anything your friend is saying, he did misinterpret a couple things and that is my fault.
When I said 2 x the price, I meant a strike price 2 x the price that the ETF is currently trading at. When I said in
the money, what I mean is roughly one strike price in the money from where the ETF is trading at. So lets say It is
Friday, UVXY is trading at $7.00, I own a March $15 call (which cost $0.5) and I had a $7.5 call I sold last week
which is currently trading at $0.01. I buy back that call and sell a $6.5 call for next week, which would be trading
for roughly $0.65.
This can be repeated week to week since UVXY continually heads down, other than temporary spikes. Since I own a call and
and short a call, the margin required is the difference between the strike prices. Even on a spike I can roll the
short call week to week (with a premium each week) until March. At that time I need to do something else. If I took
the trade off and decided to lick my wounds it would cost me roughly $8.5, since I would be short a March $6.5 call
and long a $15 call. The Greek wouldn't matter on that day.
What I would probably do in march is send both to April. At that time the premium on the $15 call that I buy would be
higher than the premium on the $6.5. I need to live through one of these experiences in order to see how damaging that
premium would be. Which is why I am just experimenting right now.
I also own put calendars in UVXY which are deep in the money (lets say $15). During a spike the near term put
(I am short) is wiped out, and all I have left is the long dated put. Once the short put is wiped out I let UVXY
ride down to where it was before the price spike and then spread it by selling an at the money put with the same
expiration as the long put. If the spike never happens, I roll the put week to week. It's biggest weakness is
a prolonged period of no volatility spikes, this is where my call strategy comes in, since that is where
the call strategy performs the best. It's a lot of fun and is still mostly an experiment at this time.
It costs hardly anything to put on these put calendars. It would cost about $1.5 to put on a June one right now.
You can roll at a premium every 2 weeks or so. And you just wait for the spike."
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