As I said in an earlier post, many new traders woke up to an unusual volatility spike. Those of us doing this for more than a year remember when this happened on a regular basis.
So far today:
- $SPY down to 281.22 but bounced up to around 282
- $VXX spiked up to over 31.80 but has settled down to about 30.75 at the moment or up about 3.35% on the day
- $XIV is the inverse of the $VXX, and $UVXY is double the $VXX and have moved accordingly.
- I bought a teensy amount of $XIV at 121, haven’t added, haven’t sold.
- I sold some covered calls against both the $UVXY and the $VXX. These are spread out over the next three expirations Feb 2, Feb 9 and Feb 16.
But here’s what I did this afternoon:
I bought two calendar put spreads, one in the UVXY and the other in the VXX.
For each 100 shares of equity in these names I bought the same number of puts with a strike price of 27 for the VXX and a strike price of 12 in the UVXY.
I sold and equal number of puts with the same strike prices in the two names (27 and 12) that expire on Feb 16.
I paid $120 for each UVXY put spread and $133 for each VXX put spread.
Since all the long, covered calls expire by Feb 16 I figure I can’t lose. These names can’t be both above and below the two strike prices on Feb 16, right?
Buying puts on volatility names has frequently been a winner for me in the past. When volatility is high is usually when you can get quite a good price for the near dated short option and then as volatility falls these short options peter out pretty quickly.