Tuesday Update: Revisiting VXX - Making The Case For Insanity

An early Daily Update today, for the reason laid out below. 

The VXX Apr $45 calls were added to the Special Situations Portfolio on March 19th at an average cost of about $3.85. Those calls reached as high as $8.65 on April 2nd before declining along with VXX itself into today's rally, currently trading at about $5.00. All in all, the roller coaster ride has seen the calls more than double, then fall back to be up just about 25%. Despite the disappointment in not seeing a market crash taking the calls up 1,000%, the trade still has made a decent three-week return whether partial profits were taken along the way or not. 

The VXX trading model is still LONG with VXX trading around the $49-50 levels. Accordingly, those calls are still a HOLD and new positions should be considered, but going out into May expiration. The VXX May $50 calls are trading around $4.00.

VXX doubled in price from $28 to $56 during the first week of February. A similar spike before May expiration six weeks from now and VXX could approach $100. Is that even remotely possible? Yes, and not so remotely as the daily volatility, whether up or down, is in place for such a move. If VXX runs even half as much as it did in early February it will be at $75 and those $4 calls will be worth upwards of $25 each. Risk $4 to make $25, and yes, you probably have to risk it all

The market is up over 500 points as I am writing this update and a recommendation to buy VXX calls seems insane. Just the way I like it. 



*UVXY is still LONG and is a suitable alternative to the aforementioned VXX trade, without using options, therefore with less risk, albeit less reward.