Polihale.com > Predictions > September 14, 2020

Discussion: VIXY is a measure of overall market volatility. It tends to go down over time. As you might expect, a major unexpected news event can dramatically push it upwards. In some ways, VIXY is easy to predict. But it's the suddenness of big movements that make it risky. For a while, I was training neural nets to only sell volatility (shorting VIXY). I'm interested in revisiting those models and exploring opportunities to hedge.

In any case, it looks like VIXY will tend towards a downward direction for a few days (again, barring any major breaking news). I won't bet big on this one. And if it starts to slide right after the opening bell, I'll probably take my profits and cash-out. When you have money on VIXY, you really need to babysit the prices or have trailing stops and pre-programmed sell prices.

If pre-market prices are considerably higher than the last closing price, I might skip this one.

Prediction Made: September 14, 2020 at 00:23 EDT
Issue (ticker): VIXY: ProShares VIX Short-Term Futures ETF
VIXY on Yahoo! Finance
Sentiment: SHORT (bearish, prices will fall)
duration: short-term, perhaps as short as intraday
expected profit: 1% to 2% in issue price; 5% to 20% with put options

How To Trade This Prediction

Note: all bets are off if there has been a major unexpected news event since the prediction

Less-Aggresive, Less-Risky trade:
Sell (short) some shares of VIXY at the next opening bell. Consider selling at least half after they increase 1% in value. In any case, sell it all within two days as this prediction does not go beyond that and VIXY is volatile.

Actual Performance:
BOUGHT VIXY Sep 25 2020 20.5 Put @ 1.4845 (it was partly filled at one price, and completed at another) on September 14, 2020
SOLD VIXY Sep 25 2020 20.5 Put @ 1.50 on September 18, 2020.
Overall gain from this trade: +1.00% (yikes!)

With this trade, $1 invested in all Polihale.com predictions since August 30, 2020 would be worth...
  • $1.81 (50% of capital invested per trade)
  • $1.33 (25% of capital invested per trade)
  • $1.17 (12% of capital invested per trade)
  • $1.08 (6% of capital invested per trade)

Epilogue: I need to do better at following my own advice. Previously, I've written that some options are lightly traded at the opening bell which results in a large spread between the Bid and Ask prices. That's a bad time to buy. Sometimes the only way to get a reasonable price is to wait a few minutes until the Bid and Ask start converging. But in a rush to jump into the market, I paid too much for my options. They could have been purchased for 1.35 if I had just been patient. I wasted time waiting for the options to just break-even.

Post-sale notes: Wow, just 1% profit despite the excellent set-up. Again, the big problem with this trade was the lousy entry price. VIXY dropped for days, and may continue to drop. But I got sick of the options barely being break-even. Exited before the weekend.

But any profit is better than a loss.