Keene: Selling the VXX November 47-48 Call Spread and 45-44 Put Spread for $0.65

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Keene: Selling the VXX November 47-48 Call Spread and 45-44 Put Spread for $0.65 by Andrew Keene | This entry was posted on Thursday, November 17th, 2011 and filed under Stock Market Comments Off

Breakdown: I sold the VXX November 47-48 Call Spread and 45-44 Put Spread for $0.65.

Profitable – I make money on this trade if VXX closes between $47.65 and $44.35 by tomorrow.

Break-even – I break-even on this trade if VXX closes at $44.35 or $47.65 by tomorrow.

Unprofitable – If VXX closes below $44.35 or above $47.65, this trade will be unprofitable. The most I can lose is $1 minus the amount I sold for the spread, $0.65, totaling $0.35.

The reason I like this trade: I have been talking on my blog recently about selling premium instead of buying it. I believe the S&P 500 Futures and the VXX are in a trading range. Since we just had a huge downward, I do not think there is more to go on the downside. And with little economic data out tomorrow, I think if the market grinds back higher then I will be profitable on this trade. I would love to sell more of this spread at $0.75, $0.85, and even $0.95. Please feel free to email me with any questions regarding this trade at Andrew@KeeneOnTheMarket.com.

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CMHTraders

(Thursday, May 10. 2012 11:16 AM)

No one jumping the bids today… so no sense of excitement. From the sell side you see large block orders come in on the limit and sellers can’t front run them fast enough. A lot of it might have to do with the punishment that has been doled out to any stock who even thought about posting a weak guidance. Seeing high PE stocks that were the next “it” taken to the wood shed to be slaughter for 50% in a day shows how bloated we were at the top. This is not remotely the market I pictured today. After such a sound beating one would think bulls would be value hunting. The only stocks show relative strength are the market leaders with low PE’s… and even they aren’t up big. This price action makes me think that 1343 was just a support breach, not a firm bottom that one could trade against.

[reply]

Michael Kudrna

(Wednesday, May 9. 2012 12:35 PM)

For CMHTraders – I’m prepared this summer for bad trading and keeping higher levels of cash than usual. Europe situation as you noted and the fear of another US Debt Downgrade/Debt struggles, among others.

[reply]

CMHTraders

(Wednesday, May 9. 2012 8:29 AM)

Remember a few years ago? The Euro currency gets pounded and our markets nosedive? The Euro rallies and we shoot up? Looks like that trade is reemerging with vengeance. The Euro is FIRMLY weaker here….

[reply]

CMHTraders

(Wednesday, May 9. 2012 8:18 AM)

AAPL/AMZN: I was able to cover my AMZN short near the lows yesterday and enjoy a rebound towards the close into which I re-initiated the short. This trade is acting more as a hedge against AAPL than a true pairs trade but I still stand by the thesis. These are the only two positions that I have on pre market.

[reply]

CMHTraders

(Wednesday, May 9. 2012 8:11 AM)

Euro back in the headlines. We really don’t have any of our own macro data to dig us out of the whole so buyers will have to step up to reverse the loss. Yesterday we got a turn after lunch. I wouldn’t look for that turn today if the markets violate yesterday’s lows. Bonds are approaching record highs… The problem is that indicator has diverged so much it’s tough to call a top. We were trading at these levels back in September but the market and volatility was infinitely higher. Should the market return to those levels both on a volatility level and absolute value level where are bonds supposed to go? Zero? The 10 year is already trading below inflation rate…. I wouldn’t listen too much to the chatter about bonds MUST come down. Some of the twits saying that are the same ones saying that there must be more QE. Which is akin to having your cake and eating it too.

[reply]

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