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.
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...
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.