Taking Apples from Somewhere Near the Top of the Tree

The best way to tell a story (well, maybe not always) is to tell it in the order in which it happened. In this case, I’ll start where I left off, and that means to describe the mystery position I took at the end of the last post. I made mention of it, but did not divulge it. It turns out I opened and closed that position all on the same day, so that by the time my last article went to press, it was already in the can. Here’s the rundown for my June 3rd open/shut:

Pictorial illustration of the entry and exit that day which completed the trade:

Next in the story was the brand-new week of June 6th-10th, and of course I got up to some mischief.  I’m going to pass some of the blame along to my co-trader (my junior trainee, who is training me as much as I am training him, since we bounce ideas against each other and then select one the way a ball is ejected from the air lottery tumbling machine).  On Tuesday, June 8th, we hatched a wild plan based on a desire to bring in a lofty credit, and nodded and rationalized to each other until both of us agreed on the reckless but attractive (at the time) idea of selling $65 puts.  A ten-day chart from today (June 21st) looking back reveals that we acted at the recent SVXY price top, and sure enough, we later ended up fulfilling our end of that entire contract.   Details are as such:

Premium brought in was 2.35 per contract for the 8 of the SVXY puts expiring June 17th, for a total credit of $1,866.56.  On Tuesday, June 14th, and Friday, June 17, we were assigned 6 and 2 contracts, respectively, so as of the present, we own 800 shares of SVXY at the share cost of $65 each.  Note that in describing my cost, I have not netted the premium brought in against the strike price of the shares; my broker likes to record it that way, so that my cost basis for the shares is computed by them as being $62.67.  SVXY is currently trading at around $55 (which is better than the $46 seen a few days ago), so obviously, this position is not a money-maker for me at the current time.  A future post (not sure how far into the future, however) will detail the disposition of the shares, as I don’t intend to hold them indefinitely.

Meanwhile, as the above was unfolding, I kept my eye on the VIX and desired to take an apple from that tree.  Not sure if the fruit was ripened to a peak, I acted anyway, believing that an apple in the bushel now is better than a missed opportunity to take an apple later.  I sold shares of UVXY short on June 10th (being too early, as it turned out later to be evident) and TVIX on June 13th (being much closer to the ideal time, which, by the way, I do not feel able to identify ahead of time.)  Entry points were as seen below:

Late in the day on Monday, June 13th, before the assignment of the SVXY shares detailed above, my positions were all behind, looking like this:  (in fact, I believe I took this screen shot after hours, when prices had worsened even more than shown in the chart above.)

On June 15th I added 150 more to my pile of TVIX short shares, at the entry of 3.20, making my average cost basis 3.29 (shown below.)

As of today (June 21st as I write this), the TVIX and UVXY apples have sweetened up a bit and the unbooked losses on the SVXY do not look nearly as bad as the above theoretical loss on the SVXY puts (computed as if I were going to buy them to close when SVXY traded at $49 that afternoon, which I never intended to do.)  Current view of the landscape:

The closing of some, if not all, of the above positions will most likely be described in the next blog post, and I hope to have something to report sooner rather than later.