After delaying far too long, I finally got back into UCO this morning. If you recall my statement on Monday, I said I had planned to get in to UCO then, but decided to wait and might regret not getting in while I had a chance. That was more than $4.50 ago per UCO share. I tried yesterday, but my orders wouldn’t hit. I kept lowering them as I chased the option contracts with no success. Finally this morning, while UCO was trading at $61.27 I sold one UCO June $54 naked put for $2.00 and received $199.54 after commissions.
Tuesday was really the day that showed the best opportunity. The falling stopped and the recovery began, but I was too nervous to take my first step. That was a mistake not just because hind sight makes it easy to say that, but because I should’ve risked just one contract that day. Even if it lost money it would only be one naked put. That was my logic today finally – just get in. At some point, probably before the June contracts expire we’ll have some much stronger days for the dollar and oil will come back down to earth some. At that point I’ll add more exposure. I hate to add more at these prices though. I could miss a few months of good trades while I wait for my expected reality to catch up to the market’s actual reality, but I don’t need to take that big of a risk on such a volatile ETF to have a good year. I have a 15% cushion on this trade, but UCO can drop 5% in a day and not even have it be considered a massive distribution day.
Have you noticed how low the VIX has fallen this week? It’s down to 14.63 as I write this. We’re just below where the 2010 levels were when we saw an extreme spike hit. We’re even below the 2008 lows that came right before it spiked again on a new market correction. I’m starting to get an itchy trigger finger to buy back the VXX covered call I just sold two days ago. If I see a turn around starting I might dump my long VXX puts too. At a minimum it makes me not want to add much new exposure quite yet after today’s trade. We could be on the verge of setting new highs again, but until the SPX breaks above 1,340 I’m more afraid of resistance beating it back down.