Trade Alert – (VXX)- BUY
BUY the iPath S&P 500 VIX ETN (VXX) April, 2017 $19.00-$19.50 in-the-money vertical bear put spread at $0.40 or best
Opening Trade
4-12-2017
Expiration Date: April 21, 2017
Portfolio Weighting: 5%
Number of Contracts = 125 contracts
You can pay up to $0.43 and this still makes sense.
If you can’t do, options stand aside.
With the Volatility Index now at a five-month high, I am happy to take a punt here on the short side.
Earnings next week are going to be good.
Ten-year Treasury bond yields are at 2.30%.
The Mad Hedge Market Timing Index is a lowly 27, decidedly in “RISK ON” territory.
And there are only six more trading days until expiration for this position.
Please note that the premium here is so rich that I only need to go in with a 5% position.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of OptionsHouse.
If you are uncertain about how to execute an options spread, please watch my training video “How to Execute a Vertical Bear Put Debit Spread”.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile with only six days to expiration.
Please keep in mind these are ballpark prices at best. After the text alerts go out, prices can be all over the map. There is no telling how much the market will have moved by the time you get this email.
Paid subscribers, be sure you’ve signed up for our FREE text service for Trade Alerts. When seconds count, this feature offers a definite trading advantage. In today’s volatile markets, individual investors need every advantage they can get.
Here Are the Specific Trades You Need to Execute This Position:
Buy 125 April, 2017 VXX $19.50 puts at…….….……$1.93
Sell short 125 April, 2017 VXX 19.00 puts at……….$1.53
Net Cost:………………………………………………$0.40
Potential Profit: $0.50 – $0.40 = $0.10
(125 X 100 X $0.10) = $1,250 or 25% profit in six trading days.
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ABOUT THE AUTHOR
The Diary of a Mad Hedge Fund Trader is written by John Thomas, one of the founding fathers of the modern hedge fund industry.
Seeing the incredible inefficiencies and severe mis-pricing offered by the popping of multiple bubbles during the Great Crash of 2008, and missing the adrenaline of the marketplace, he returned to active hedge fund management. With The Diary of a Mad Hedge Fund Trader, his goal is to broaden public understanding of the techniques and strategies employed by the most successful hedge funds so that they may more profitably manage their own money.
John graduated from the University of California at Los Angeles (UCLA) with a degree in biochemistry and a minor in mathematics in 1974. He moved to Tokyo, Japan to join a Japanese securities house as a research analyst, becoming fluent in Japanese. In 1976 he was appointed the Tokyo correspondent for The Economist magazine and the Financial Times. For the next seven years he published thousands of articles about the economies, companies, and leaders of Asia. He was one of the first American correspondents to cover China during the Cultural Revolution.