Misconceptions, mistakes and noobs
Contango is undoubtedly the prime factor in determining UVXY’s price path, but there are many misconceptions about how this works and its true impact. Many postulate that since the daily roll happens at the end of the trading day, simply being long or short the shares before and then closing the trade after will net […]
How Contango Crushes UVXY Read More »
Gambler’s fallacy is the contention or belief that a string of results that are outside the expected will influence the next result. As a coin flip count increases, so do the results get closer to 50/50. After seeing ‘heads’ 5 times in a row, what are the chance that ‘tails’ will show up next? Sorry,
Often I see traders look at UVXY’s or other vol tickers’ inflows to highlight the obvious ‘accumulation’ phase that indicates price support and higher prices. What they typically fail to account for is the change in spot price over their chosen measurement period. UVXY is an ever declining ticker with brief, and violent, spikes to
Derivative Inflows Read More »
This sentiment is a common suspicion held by some, and is quite understandable. If you are making lots of money as a trader, why would you bother with side side hustle? Surely must mean that you in fact have no actual trading business and instead are PRIMARILY just a subscription service! I’ll admit that it’s
Probably the most common misconception is that UVXY should follow the changes in the VIX index itself, I mean it’s supposed to track vol right? This is so prevalent that ProShares screams this to visitors when arriving at their UVXY page (first paragraph AND a bright banner at the top of the page). You think
UVXY Does not track the VIX Read More »
It’s natural to worry about external threats to shorting UVXY outside of VIX spikes causing the price to ramp. What if an organized group kept buying shares or Calls, raising the price and forcing shorts to cover which further adds to the buying pressure? Well, a short squeeze would become apparent when UVXY’s spot price
Pinning is the idea that ‘they’ will attempt to close out a session or expiration at a particular spot price, presumably a high volume option strike so that neither Put nor Call buyers get paid. While this possibility exists for lighter volume underlyings, as liquidity increases, the viability for this to happen gets reduced greatly.
Shorting requires a holder shares to allow them to be lent (in exchange for a borrowing fee) to others. UVXY, along with other levered ETFs are commonly listed as ‘Hard to Borrow’ (HTB) with few, and sometimes none available for lend. Many brokers, such as TD Ameritrade, offer a Hard To Borrow program that gives
No Shares To Short Read More »
A favorite boogieman to many traders, Market Makers are an indispensable ingredient that ensures liquidity, without which we’d not enjoy the fills we get each day. One of my early strategies involved selling vertical Call spreads on the opening day of a new weekly option expiration. Often I’d be the only volume on that series.