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ProShares Ultra VIX Short-Term Futures Message Board

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  • xtradersdotnet xtradersdotnet Apr 3, 2012 7:22 PM Flag

    Sep $15 calls sold for $6.10 and puts for $6

    if uvxy is 10 you sell out your longs shares for a loss of (15*6) of 9000

    and buy back your calls @ about .05 = (9000-75) = profit of 8025

    so you are headged as long as you let it go at 10.00

    for my above post i meant UVXY > 21 = max gain of 9k

    am i right or am i missing somehing here

    there is a way to put these high priced options to your advantage as long as you are willing to let your share go at a certin price right? or am am i missing something?

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    • one more screw up, since you sold the 16 calls and went long then you also gain an extra 1500 so max gain if over 21 is 10500

    • You are assuming the ideal condition in movement of UVXY in either direction to expiration. Simply put, what if UVXY move to either $10 or $21 in just a couple of days, you do the math. From now to Sept expiration is a very long time to predict the movement of any stock.

      • 1 Reply to kfetbeta
      • If it goes to 21 in two days or expiration it is all the same from the options standpoint. Actually, it might be even better, especially if you get exercised. You get your max gain in the shortest time possible. Only the slide to 10 in two days would be a bad thing. Then you need to exit the trade when options still have the most extrinsic value. However, since it is moving away from the strike, it will still be lower than the purchase price. So only the quick down move is a bummer, while the quick up move is a supreme win. You can enter another trade in the same time frame. As a rule, however, when selling (writing) options, you generally want a shorter time frame so it gets to expiration more quickly. When you buy, that's when you want the extended time frame so you give it a chance for it to move the way you want. If you are interested in options, VXX has weekly options that are fairly easy to master, IMO.

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