As reported in real-time yesterday, our entry on the ProShares Trust Ultra VIX ETF (UVXY) was in the 6.23 to 6.30 area. It has moved higher since so any entries in that price zone were almost immediately profitable. It's now pushing above 6.80 as I write, and there is working well. The question now is whether this fulfills the original objectives of the trade. I trade the VIX using the UVXY when I think we may be at an important downside inflection point in the general market. I don't have or need a "model" to handle this - I simply use my trading acumen (such as it is) in combination with a variety of contextual factors. The trigger point occurs primarily based on the action of leading stocks and the general market. The objective is to catch an inflection point that yields a gain of 20-30% or more very rapidly, with the understanding that the trade does not have to work. That's what your stop is for.
For this reason, I generally take a heavy, very full (maybe even stuffed!) position at the initial entry, and will peel off tiny amounts as it begins to move higher, generally 10% or more. The VIX tends to be volatile itself, hence the UVXY will be as well. If you choose to jump on this ride, fasten your seatbelts. For now, my trailing stop is my original entry at 6.23. As noted in yesterday's report, I would probably only allow for a maximum stop at 6.00, but once you are up and away with the position you can manage it a bit more deftly in terms of selling into bursts and buying back on reaction pullbacks.
Short-Sale Set Up - Long VIX via the UVXY Follow-Up 3/25/21
|Published:||25 Mar 2021 10:34 ET|
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