Profiting from the Side Dishes

If it sounded like I had a little trick up my sleeve upon hastily closing my last post with a promise of quick and interesting updates, here’s a confession:  Yes, one typing hand closed the post while the other was closing my TVIX short (see detail below).

Crown jewel of June 21st, an otherwise lackluster day

Everyone who lived through it will agree that nothing in particular happened on June 21st, but somehow I got a little shaken up inside and decided it was a good idea to close that short and take the money instead, going into the unstable week laced with Brexinsanity around every corner.  Of course, I learned a few days later that I could have held onto it a little longer, but that’s nothing I could have predicted, so I willed my blood pressure down as I saw, two days later, TVIX prices fall as low as 2.33 (just about a full dollar under my initial entry point and 40 cents under my non-optimally-timed exit point).

To distract myself, I turned my attention on June 23rd to the large collection of SVXY that had been put to me (as shown in the last graphic of the previous blog post) and hunted around for some premium.  There wasn’t a ton to be found, but I wanted a few dollars for my mental anguish (and reduced account value) so I looked for a strike I could stomach and a dollar amount that wouldn’t be a total insult and settled on the consolation-price figure of a few hundred dollars for taking on a one-day contract.  With SVXY trading at around $56 that day, I wanted to make sure I risked my shares being called away from me at a price no lower than the $65 I had, sadly, paid for them.  Actually, I did a little bit of computation and decided that, upon the unlikely event of my shares being called away, I’d be willing to book a loss on them roughly equal to the amount brought in on the calls I was selling that might effect that action.  So, with 64.50 as the strike and 0.40 as the premium brought in, I wrote that contract and enjoyed the full benefit of all premium brought in after it expired the next day worthless.

The option activity chart (below) for this contract is truly humorous, as you can see that while someone else jumped in there along with me, I was there for the very short duration of this contract’s existence. I saw the story through from beginning to end.  From 0.40 to 0.00.

The next thing happening was on Friday, when I knew the option would expire, requiring no action on my part.  No distraction now prevented me from reflecting upon the TVIX short I wished I had not cashed in.

Sometimes my timing is not the best, and this was one of those times.  But instead of dwelling on it, I look forward to the day I’ll cash in this short, just as I did the previous one, for some kind of profit.  As seen in the chart below, I decided on the morning of Friday, June 24th to stop thinking about it and just take advantage of the overnight gap and get back in.  Shorting TVIX at $2.80 (compared to the $2.76 exit point several days prior) didn’t seem so impressive once I was in the position, but I felt fortunate not to have lost any ground, having just the day before witnessed prices (as previously mentioned) as low as $2.33.

Little did I know I was in for a bit of a ride – and by that I mean simply seeing TVIX do nothing but rise for the rest of the day and on Monday, June 27th, finally topping $3.60 as I cringed and tried to think about other things.  But that seems to have all come out in the wash now, along with the damage to the UVXY short I held alongside it the whole time (mentioned in the previous blog post.)  The shorthand summary of the two short positions:

I sold UVXY short on June 10th at $11.25, and still hold it short today, with a current trading price (as of today, July 5th) of around $9. ($8 was seen one trading day ago.)  UVXY went against me to a height of $17.12 on June 16th.

I sold my second round of TVIX short on June 24th at $2.80, with a trading price today of around $2.  This round of TVIX mocked me up at the $3.68 peak on June 27th, but I’m still standing, and in in the green, on both of these positions today.

My next post may detail some action taken on one or both of the shorts, but hopefully I’ll be able to report what I consider to be more interesting news regarding some action taken on the SVXY shares – either disposal of them or at least profitable calls written against them.  Also, maybe I’ll have something else to report in the options department, since the UVXY and TVIX shorts are just like side dishes to me, and I’d rather get something going on the main section of my plate.