The Money Tree

Safely Generating Income in Retirement

Position Update – VXX

Posted by mounddweller on July 9, 2012

Fellow Traders,

My sad saga with VXX continues.  Today, I decided to roll out and down my JUL $21 puts.  I had to go all the way out to DEC to obtain a net credit at the $20 strike.  Even after rolling down I’m still $6 ITM with a lot of ground to recover.  Here’s the specific trade I executed today:

BTC 5 JUL $21 puts at $6.95

STO 5 DEC $20 puts at $7.55.

As you can see I got a net credit of $0.60/share but had to extend almost 5 1/2 months to get it.  Thus far, since entering this trade back at the end of February I have collected $1,604 in premiums and have had an average capital requirement of $10,500.  Thus, my ROIC (assuming I’ll eventually dig myself out of this hole) is over 15%.

To break-even I’ll need to BTC my existing short puts at $3.21.  Instead of waiting passively for that to occur I’m going to alter my strategy.  Going forward I am going to look for opportunities to trade in and out of the position based on the stochastics.  Right now the slow stochastic is below 10 and the fast stochastic is just above 20.  These are very bearish levels and usually indicate a turn around is imminent.  My objective will be to BTC my new DEC short puts as the stochastic increases to 80.  I’ll then sell another round once the stochastic drops back down to 20.  I’ll keep repeating this process until I’m able to dig myself out of the hole I’m in.

Then, I WILL NEVER AGAIN trade options on ETNs.  I have been burned twice now, first it was in UNG and now again in VXX.  I will not attempt a three-peat.





3 Responses to “Position Update – VXX”

  1. SB said

    why did you not sell some calls against this when you went underwater? …or is this an IRA? If so would you not be better served in taking assignment and selling monthly calls instead of rolling out the put until Dec.

  2. Rich said

    Hi Troy,
    I have been selling puts myself on VXX since April. I also find myself in a similiar situation as you with my puts now deep in the money. Yesterday I rolled my Jul 17 put down and out to an Aug 16 put for a net debit. My plan is to roll out and down each month to lower my exposure to VXX. I only have $4900 in capitol tied up and do not intend to add anymore. ETNs do not seem to track the same as stocks or ETFs.


  3. colaroaster said

    i 8k @ 15.50 and am holding for 4-6 months

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