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ProShares Ultra VIX Short-Term Futures Message Board

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  • richard_rapp richard_rapp Aug 5, 2012 9:49 AM Flag

    writing covered calls to bring cost basis down is this good?

    xtra

    the idea is sound. I would have sold the Aug 7s at that time. For example if you bouht at the close Friday for 6 bucks you could have sold the Aug. 6s for .65. If it stays about 6 you make over 10% in two weeks. Also if it falls (which is all it seems to do) your basis is 5.35. this is how I do it. Problem is when you get that big spike and the VIX doubles you miss out on the big upside. II just can't take the pain so I sell the current month near ot at the money stikes.

    As another poster pointed out the VIX is so low that selling the at the money migh not be the best move at this time. I am in at 7.26 with the Aug 7s for .95. Looks like I will be selling some 6s in to weeks

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    • the issue you have to address is

      "Will the option premium I recieve be less than the drop in the ETF price one month longer"

      If the answer is yes, then you are increasing your losses.

      If the naswer is no, then it is a good policy.

      As I mentioned, it all depends upon how high the spot VIX will be when a decision needs to be made versus your loss at that date.

      Best of luck.

 
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