E UVXY: Market Uncertainty And Telling The Untold Future

The action taken proved prescient, fortunately. In truth, it was nothing more than strategic, disciplined action sprinkled with a little bit of good luck. I say this because during the week of March 21st, shares of UVXY were found trading at much higher price levels than where I had covered a portion of my shorts, locking in profits.  Don’t get me wrong, the remaining shares in the Golden Capital Portfolio have given up some of their profit level with UVXY’s share price increasing, but that is the nature of holding such an instrument long-term; you give a little to earn a great deal more over time. 

Last week, most trading days found shares of UVXY trading higher. There was a good deal of volatility during the week and levels of contango had fallen with certain VIX Futures contracts expiring during the week. I used the opportunity that found shares of UVXY trading higher than where I had covered to trade shares during the week and found a goodly amount of success in doing so. Additionally, I was able to take some of these acquired shares and put them back into the portfolio’s core UVXY position for long-term consideration. Having covered shares on March 17th, I was able to reshort those shares as high as $19.85 on Friday March 25th, $4 higher. March 25th found many investors/traders pondering the pending healthcare legislation vote. The equity markets rose and fell sharply in both directions that day, producing volatility and trading opportunities for which I took advantage. 

“There are absolutely no limitations to where you can go”, said Mr. Baldwin in his literary works. And that is certainly the truth as it pertains to shares of UVXY near-term. But knowing the near-term directional movement of UVXY is of little concern to me given the design of the instrument. VIX-leveraged instruments like UVXY, VXX and TVIX are designed to decay in price over time. Sometimes the time variable can offer a short duration for achieving profits and sometimes the duration can be extended for a few weeks and in extreme cases a couple of months.  What is of greatest importance for Vix-leveraged investors/traders is the maintaining of liquidity and/or ample cash to withstand periods of volatility or “backwardation”.  Having a sound investing/trading strategy for shorting these instruments is optimal and beneficial. It is for this reason that I offered to readers/investors/traders my strategy for utilizing these instruments since 2012. In the article “UVXY Reverse Split Ahead: How To Position When Volatility Spikes” I explain my strategy for layering  into shares of UVXY as well as maintaining liquidity.   I would go so far as to suggest that anybody employing this strategy would have achieved a strong profit performance since 2012.  Ok, time to buckle back in and get back to where we came from. 

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Disclosure: I am short UVXY and VXX

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Vibrant Cosmos 1 year ago Member's comment

Sorry hear what you had to go through as child. Very much agree the quote. You have been motivation for me to follow a methodical approach for profits, i might not be as aggressive as you are in shorting $UVXY, but am short never getting into a "called in" situation. Thanks for your posts.

Seth Golden 1 year ago Author's comment

Thank you for reading and your comment. I'm glad to see you are accommodating for necessary liquidity and achieving strong results.