The Money Tree

Safely Generating Income in Retirement

Archive for March 18th, 2012

Update – VXX

Posted by mounddweller on March 18, 2012

Fellow Traders,

I want to update you on my VXX trade.  As you’ll recall I entered this position back on February 29th, selling 5 VXX MAR naked puts at a strike price of $22.  The premium I received was $0.50/share.

At the time I placed the trade VXX was trading around $24.52.  The recent low had been $23.72.  My strike price at $22 seemed reasonably safe.  Alas, the best laid plans often don’t work out.   While I thought the market was ripe for a correction which would cause VXX to rise just the opposite happened.  The market has continued to move higher sending the VIX and VXX lower.  Friday, VXX closed at $21.56.

Rather than have VXX put to me I elected to roll out my position.  However, instead of rolling my puts out to the normal monthly APR expiration I chose to roll them to the next available weekly expiration on Friday, March 23rd.    With just 8 days to expiration I was able to roll out with a net credit of $0.62.

Net of commissions my total credit thus far in this trade is $535.02.   If VXX closes above $22 on Friday I will have earned a 4.86% ROIC with a holding period of only 24 days.  If VXX remains below $22 next week I will roll out another week.  Sooner or later the  market will have a down day or two and that will be my opportunity to close the trade at a profit.

Regards,

Troy

Posted in Portfolio Updates | Tagged: , , | 8 Comments »