MyOptionsEdge.com: New website launched!

Hi there,

I encourage you to visit my new website at www.myoptionsedge.com !

In essence, every year I will start a new account with a fresh 10k that I will manage with my own option trading strategies. My annual goal is to reach 50% in profits. This means ending the year with $15k.

I will also regularly be adding some blog posts that you can look at: https://www.myoptionsedge.com/options-blog-list

For the ones that are willing to learn by following my trades, there are memberships available: https://www.myoptionsedge.com/learn-from-my-trades , including access to a trading room.

 And best of all: my courses are available for purchase. Yes, I am willing not only to teach how I am trading, but also you can learn directly from my strategies: https://www.myoptionsedge.com/options-trading-courses

Take a look there!

JPMorgan Sees Technical Pieces in Place for a Bottom on S&P 500

How Volatility ETNs work?

(extracted from vixcontango.com)

The VXX buys VX2 futures (second month) and sells VX1 futures (front month) on a daily basis. The SVXY shorts VX2 futures and covers VX1 futures on a daily basis. The closer we are to VX1 expiration, the smaller the amount of VX1 futures and the larger the amount of VX2 futures that are traded. The amount is proportional to the time to expiration. The daily weights of the VIXY and SVXY are available for subscribers of this site on the front page.

Because of the heavy reliance on VX1 and VX2 futures inside the Volatility ETF/ETNs, Contango is a very imporant indicator for traders of VXX and SVXY

So long as the Contango is positive and high that results in automatic increase in the SVXY even if the SPX, spot VIX and VX futures are flat for the day. That same dynamic results in automatic decrease for the VXX. For example, if the Contango is 10%, that usually means the SVXY will increase 0.5% automatically provided there are no changes to the VIX. Why 0.5%? Because you divide the Contango by the amount of trading days during the VX1 contract term. Only that that portion of futures inside the ETF gets rolled over on a given trading day. Usually, VX future contract terms are either 20 or 25 trading days (4 weeks or 5 weeks). So you divide 10% by 20 to get to 0.5%.

If average contango is high, over time SVXY (Short Volatility ETF) can be expected to gain value above the average reduction in the spot VIX. This explains the SVXY outperformance over the S&P 500 index and it is important to understand that it is not an accident and it is not something that is propped up artificially high because "there a lot of buyers". The Volatility ETFs stick to their formula and if there is additional demand, they simply issue more shares. If there is less demand, they reduce the share count. But the share price of the ETFs follows the mathematical formula, period. As such the SVXY gains value based on VIX Futures fair value math and contango. So long as spot VIX is low and contango high, there is no limit to how high SVXY can go. And vice versa, there is no limit to how low VXX can go.

VXX Warning 
While VXX are advertised to the general public as "portfolio insurance" product, it is anything but. Due to contango, the VXX may not rise when the market falls down. If contango is high and the market is slowly grinding down, the VXX will lose money daily. More often than not, the VXX will contribute significant percentage losses to your portfolio. Unless you are a day trader with volatility expertise, you should avoid investing or trading in VXX or other long volatility products .

Contango alone, however, doesn’t tell the whole story with regards to the SVXY. If the market drops and the VIX Futures Curve gets reset higher, the Contango is of lower importance now as what was formerly shorted VX2 at 15 (for example) inside the SVXY, now has to be covered as VX1 at 17 for a loss. This is what causes the SVXY to post massive daily losses during one or two day sell-offs in the market and why if the entire futures curve moves higher, the SVXY can start to lose you money quick. That is why while the SVXY can be a very powerful passive investment instrument, it still needs to be monitored constantly in order to avoid the large percentage drawdowns that inevitably come about (see performance of SVXY in the back half of 2014).

Latest course published! Full VXX trading experience with live trades and risk management teach

My last course at Udemy is not a pure conceptual course! Is a full trading experience.

You can use this link:

http://bit.ly/vxxexp

 

I will describe and discuss volatility trading and how to manage a real live position! I will post a live trade (already did!) and follow it up until its close (about 2 months) for the Dec 18 options cycle - having a video explaining the fundamentals of any adjustment (or decision on no adjustments)!

After the success of the other courses, some students requested me how I am combining my VXX trading arsenal, how is my full  trading approach or, better saying, how I am trading the VXX limiting my overall risk!  So, here you have it!

To take full potential of these trading lessons, it is better to understand the concepts of volatility trading and how VXX works. For that, I encourage you to have one of my other courses.
In these practical lessons, you will learn how I am putting it all together! I think this learning experience is the best way to understand how to trade options the right way, as pro traders do!
Instead of a more conceptual course, these practical lessons will transfer my knowledge to you in a very pragamatic way! I will start with a live example and will manage along the trade develops. 

It is mandatory to understand how the greeks affect position and are relevant to overall risk. Trading options without looking to them and how they impact your risk, is like gambling! We will start with a brief lesson describing what are the greeks (Delta, Gamma, Theta and Vega) and what they mean to proper trade options (and how to combine positions or adjust trades to manage risk efficiently).

This is practical showcase on options trading and my full range of strategies on VXX. I will show live trades (since their open) and show how to manage overall risk as time passes untill their close!

You should expect that the "Croc trade" will be the basis of my trading and I will manage risk with short-term strategy as also with other positions.

As a blog reader, you can use discount code (also valid for all my other the courses): VXXPBBLOG

Market fundamentals remain strong

According to FINOM Group:

It happened in Q1, Q2 & now Q3. Pullback ahead of earnings. I follow trend of upwardly revised EPS and the market eventually catches up 2 those SPX earnings results. Again last week, an upward revision of .5% week-2-week!

Tom McCellan twits on possible washout bottom!

Tom McCellan: "Spot VIX Index on Friday was still above all of its futures contracts, which is a sign of a washout bottom"

Why this Blog

Making a brief history about me, I started trading stocks about 10 years ago. I researched and studied a lot, like majority of traders around the internet community. After not being successful and having a bit of time, I moved to Forex, but again I did not reach the consistency to become full time trader. After some years focused on my management consultant job and given some content of a project developed at an energy company, I took the first steps of risk management and hedging in commodities. That made me turn again to trading but with a different perspective! Learn the derivatives markets, specifically options and several strategies. After testing some strategies on a practice account and learning how options work, I started to trade live! But then came the August 15 charsh and I learn that on every trade there should be an hedge! At that time I was trading SPX options, as I considered individual stock too risky. At that time I also learn about a new asset class: Volatility. And for me this present the best opportunities in the market in a very consistent way! But, obvioulsly, always managing your risk! We never know what comes tomorrow! Even if we think about the low probability of a mini-crash!

In the last year, I researched on this field, and specialized on VXX trading (a long Volatility ETN from Barclays). Started with basis strategies, like buying longer term puts and selling shorter term Call Spreads and hedging techniques! But, soon after I realized I needed more complex strategies to better manage risk and developed "The Croc" trade! This trade is specifically designed for VXX and capture its price erosion, options time decay and protect investor from sudden volatility spikes!

I decided to share my accumulated knowledge on these topics (options trading and VXX) on Udemy platform where I developed some courses on Volatility trading.

I also though to create this blog, as a curator of volatility and financial markets information. Not only easily finded in the web, but also producing some content.

I have no prior experience in Blogging, but I will also commit to learn and improve this Blog!
You can also follow me on Twitter (@XIVy_VIXSpot) and Stocktwits (Volatility_Edge)!

To celebrate the launch of this Blog, I am giving away 10 coupons with ~80% discount on all my Udemy courses (one of them is the Short Term VXX Strategy http://bit.ly/shortvxx) - you can use VXXPBBLOG!  It uses a Call Spread with a defined criteria (Deltas and DTE) that was optimized and backtested to produce high returns. Also, it discusses hedging strategy in case of Volatility exploision!