VXX Chart – Solid Support

I charted VXX this afternoon a little after 3:00 pm when it was trading at $26.74. I’ve mentioned VXX a couple of times and have a two August 24 naked puts I’m sitting on. I’m considering adding some more at lower strikes. I’ve been sprinkling in a few 21-23 strike puts for some clients and think it might be worth me adding more for my own account too.

VXX has been following a good trend line of support for the past few months and I don’t see volatility dropping much more in the near term. Of course if it does, that means the rest of our naked puts will improve for us, so it’s a nice hedge and can just be profitable on its own. Although VXX has had a few spikes here and there, the $31-32 area looks like it is a good exit point. I’ll be quite happy just taking in the premiums from my puts while I wait for a deeper fall.

Keep in mind that VXX could just as quickly drop below $20 and stay for a while, so watch this trend line and be ready to exit or have your puts assigned.

More on this topic (What's this?)

VXX (All Allan, 8/17/10)

VXX update (All Allan, 7/15/10)

DS Trading: Position Update (DTO, SDS, VXX) (, 6/28/10)

The Vicissitudes of Hedging Tail Risks (Condor Options, 7/23/10)

Read more on Ipath S&P 500 Vix Short-term at Wikinvest

« « DJIA Chart – July 16, 2010 - | - Sold More VXX Naked Puts » »

Comments (2)

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2 Comments

Comment by oscarwildedog

Alex,

Due to the reasoning that I am not comfortable with the consensus $96 in earnings for the S&P in 2011, I am selling VXX calls (starting at $21 and moving down) all the way out to the Jan12 LEAPS. Obviously, I wouldn’t mind owning the VXX at these levels, but the main thrust is this: due to the heavily correlated gamma/delta move (in my favor) everytime volatility spikes, I am getting anywhere from a 4:1 to 10:1 ROI. For example, if the S&P sinks 5% then, depending on the month, I will get a 20-50% ROI on the VXX should I decide to buy them back.

I can do this over and over again.

Best, John
Comment by Alex Fotopoulos

John,
Do you mean you are selling VXX PUTS, not CALLS?