I sell naked calls (UVXY) using Optionshouse. They have been helpful with my questions. Not sure how UVXY will function in a bear market, but seems with contango it would function about the same way. Backwardation only last a short time, but the Summer of 2011 was certainly a different situation and selling naked calls on UVXY then probably would ruin my account.
Sentiment: Strong Sell
I originally sold 100 calls for ~$48 then I got a margin call and covered 50 of them around the $52. This very quickly came back to earth and I then covered then other 50 contracts at $34. Now I am working the March 32 strikes though only sold 25contracts at $3.50 and am waithing for somesort of a spike in UVXY then sell another 50 or so. This seem pretty easy though I have not been in these funds while there is a deeper pullback or longer bear trend.
I often wonder what the probability of UVXY being closed is. I certainly have been giving me money. I have only been trading it in this current market type environment and have not experienced any true bear market while trading volatility but do remember watching VIX during the Summer of 2011.
I will trade out with some gain if a quick spike in volatility were to occur. Many people feel Dec and or Jan will have some up-ticks in VIX. However my Jan14 calls in VIX will have accelerated decay by then, so I will have to think about rolling out further before too long in time.
Sure would like to see a bit of a spike in vol. I am long the Jan14 VIX $21 call for $1.00 last week. A nice spike then will allow me to short UVXY calls and purchase those puts. But still making some $ on the short calls of the Dec13 $35 strikes in UVXY
I had an OptionsFirst account and I had privilege to do everything but sell naked calls. You might be able negotiate the commission fees, but I have found Options house to be much cheaper. Plus, the allow me to short naked calls. So it all depends on the level you have to trade.
I got one also. I know it is just a matter of time and my short calls will be fine, but I do not know how much longer my account will hold on. Good luck
I figure that when you shot something, you define the gain and have an undefined risk. When you purchase, you have a defined risk with an undefined gain.