A Tesla Bearish Option Spread and an Update on $UVXY

I was a bit reckless with my option trades today, and surprisingly, I didn't get burned.  I may actually make some money on it. It will probably come back to haunt me.


I sold a call spread on Tesla ($TSLA) with a one day expiration.  The stock came out with earnings last night, and although the stock initially went up, it faded quickly and was down by 10 am or so, when I put this on. 


The stock had dropped from $280 last night down to $260, so I sold a put spread:


Sold the $262.50 for $2.24 for expiration tomorrow.
Bought the $272.50 for $0.55 for the same date. 


If the stock stays below I get the entire spread.  Short duration, but there was still a fair amount of implied volatility, so a decent return. 


Stock dropped to $256 by the close, so I could have taken it off for a solid win, but will hold for a bit tomorrow.  If it stays near that price I will let it expire worthless. 


An update on $UVXY.  If you haven't tried this strategy, one thing that can happen when you sell a call or put is that they can be exercised early.  That happened to me today, the $19 call I sold was bought back, locking in my losses.  Bad. However, $UVXY continued going up, so the exercise stopped me from taking larger losses.  Good!


The $21 call trade I sold isn't looking great either.  The stock closed near $22, and the option expires tomorrow.  I need a solid fade to make any money, and I'm not confident about it. 


That's the risk of doing this.  A few bad trades can really blow up your account.

A Bullish Option Spread on $AAPL

I have a long term put option on Apple, but since I have been watching it closely, I saw that it had been upgraded this morning.  The stock seemed to be steady, so I thought it might be good to put on a very short term bullish spread on.  I had some cash available from my winning $YELP spread that expired on Friday.


I sold a put spread (which is bullish).


Sold the $135 weekly put for this Friday for 40 cents
Bought the $132 strike weekly put also for this Friday for 9 cents.  The underlying stock was trading around $136.20 at the time.


If this works, that is, if $AAPL stays over $135 through close on Friday, I'll pick up the whole 31 cents (that is, $31 per option.)  The stock closed at $136.69, and I am already in the black. 


It's probably not smart to trade such short duration, I don't really have much chance of picking up much of the implied volatility, but it's a straight directional bet that the stock won't go down, or go down very much in a short time frame.


I'd like to update my position on the trades I made last week.  I have two bullish bets on $UVXY, short a $19 call and a $21 call.  The $21 looks OK, $UVXY closed at $20.69, that would pay off if it stays here.  The $19 is losing at this point, but $UVXY can fall quickly, so I will hang on to it for a few days.  Of course, it can also spike, but I have offsetting long calls at higher prices to give me some comfort.


Enjoy trading.

Shorting the Spike in $UVXY with a Call Spread

If you read yesterday's post, you saw I made a bearish bet on $UVXY, which is more or less a bullish bet on the market.  I got stung a bit, although it was done with options that don't expire until next Friday.


I was taken to task a bit for not using the correct terminology on $UVXY and the $VIX, to which I will plead no contest.  For my purposes, it's not important to identify the how the products work exactly.  I don't need to understand the physics of gravity to know I will hurt myself if I jump off a building. 


With that out of the way, $UVXY did spike this morning, and rather than wait, I sold another call spread at higher strikes.  Putting on more risk but hoping for a drop as the markets quiet down for the weekend and contango kicks in.


Sold the $21 February 24 Call
Bought the $25 February 24 Call


I got a credit of about a dollar again.  Price of the underlying was $20.80 at the time I put it on.  The price jumped to $22 before closing at $20.11, so I am ahead on this trade at end of day, but behind on the one I made yesterday at the 19 strike.


A word on liquidity.  I closed out a trade today I didn't discuss when I opened it on $RH.  I had sold the 26 strike and for a while I was looking pretty good, as the stock dropped below $25.  I didn't take it off with a win because I couldn't get a good price because the option was illiquid, hardly any bids.  It's teaching me to focus on activity traded options.  Even if I see a very good deal, I may pass if I can't cover when I want to.


As it turns out, $RH got a buy recommendation and the stock jumped over $27.  Lesson learned (hopefully). 


Good luck trading.

A Bearish Spread on $UVXY

I wasn't planning on any trades today, I thought I'd hold some powder back, but an opportunity opened up and I decided to take it.  The $VIX climbed today and along with it, the $UVXY, the 2X Ultra VIX Short Term Futures ETF.  $UVXY is a function of the $VIX, which is known as the Fear indicator, a measure of volatility.  When the $VIX goes up, it generally means the market is going down, although that wasn't the case today. 


The market has been pretty complacent lately, and despite all the political rumbling, I didn't see anything that was an immediate reason for the spike in the $VIX or $UVXY, so I decided to open a trade against it.


I shorted the $19 March 24 call (next week's) and bought the $24 strike for the same time period. It gave me a net credit of just under a dollar at the time.  $UVXY was trading at $19.50 when I made the trade, up a dollar.  It gives me a week for it to drop back under $19 to get the full credit.  Remember, Monday is a markets holiday, which is calculated into the option price.


The stock traded as high as $20 and closed at $19.80, so I could have done a bit better.  We'll see.  I spoke to someone after the market close who said it was $VIX expiration this morning, and it's not usual for the index to behave oddly at expiration.  Technical mumbo-jumbo. If so, all the better for a pullback.




Good luck