Time To Go Long Volatility?


Excerpt from Blue Line Trading Weekend Update: 

UVXY/VXX Buy Signal

Using a simple stochastic an opportunity is presenting itself buying calls on either UVXY or VXX. For the purposes of this study I am using UVXY, just because the VXX "rebirth" earlier this year has tainted my historical VXX database. I've placed the date under every stochastic cross-over from out of oversold levels, and the corresponding closing price of UVXY on that date. This is nothing proprietary to me, you can do it home with any free online charting program. Not every one of these stochastic crossovers resulted in a blockbuster win, and some certainly work better than others, but two out of three have generated triple digit gains in "next month" at-the-money calls. 

With price momentum so oversold, just out of the money calls are usually selling at about 10% of the price of UVXY at the time of the signal. On Friday, with UVXY closing at $27.21, the October 18th $28 calls closed at $2.67. It would only take a UVXY rise to about $33, about 20%, for those calls to double. On the six trades over the past 12 months the average pop on UVXY after one of the crossovers is 44%. That comes out to an average maximum return possible of about 200%, more or less...and that includes two of those six signals that didn't even reach +20% (Mar 6 and Mar 22). 

FAQ: What about the years before this past one, how did the cross-overs do over the past three years?

A: Without clogging this important chart up with number clutter, as with the past year and going back 3 years only about 1 out of 3 signals do not reach +20% UVXY price appreciation (correlating to a 100% gain on the calls), 2 out of 3 easily reach 20% or more, and 1 out of 3 reach +200% returns, many of which reach as high as 300%. 

FAQ: Can this strategy be used without options, just buying the underlying UVXY or VXX?

A: Yes. 

FAQ: How many of these signals have you taken, i.e., how many are real time vs. hypothetical? 

A:  One - this one. If you want to see for yourself, use any chart program, insert a 21 day stochastic, and see the results. 


We have been having same great success in our PRO trading over the course of the past few weeks, led by a 387% gain in ROKU $145 Puts. Last week we had seen new trading signals, all but one pointing in the same direction. October jul due a great time to tray out the service. With 50% off the first month, that's $100 for a shot at the next ROKU.