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TZA, FAZ, bear 3x mega gain

|Includes:DUG, Direxion Daily Financial Bear 3x Shares ETF (FAZ), TECS, TZA, VXX

This has turned out to be a phenomenal trade. I've a total account worth about $200K, and thus far, the gains:

VXX-- $1000. I cashed this out because of its lack of contango that I could wrap my head around.

DUG-- $200. I was much to late to this one, and just did a daytrade shorting the underlying.

TYP-- $1500. Again, another swing trade of a 3x bear. Like so many other ETF's the options do not have enough volume.

The two in a another class:

FAZ--$26,350 profit open at 36.18 price.
TZA-- $10,760 profit open at 28.43 price.

I've compiled a couple of trading rule here with the use of shorting and options, based on the price of the underlying:

A +$40 ETF is optimal for buying bear puts. Anything lower than $30 and the delta of a move requires too much leverage.

Shorting the bear 3x's that are under $20 makes a lot of sense. The greatest danger of shorting these vehicles is a move to the upside, but its limited in potential due to its starting point, and because you have to buy too much premium for shorting options here.

I have had a delta position of about 1000-1300 for these two bear ETF's to generate that profit, and have this past week doubled the delta of them to:


Now, its possible that these reverse lower. My current break-even price has shifted quite a bit lower with having increased the delta relatively late in the move:

FAZ-- $47.40

It's of course easy to let greed in, and begin looking at the potential profit at hand with the potential that the market continues in a bull channel through the Jan expiration of these options. If it does, I may even just take the short assigment, which would translate into:

FAZ--4500 shares short
TZA--3500 shares short

For that to happen, I'd need them both to be, at the least, at or under $20 by Jan 20th, due to the amount of buying power in my account. That potential gain:


But what's more to the point is risk management, which I remarked on in the previous post.

I had taken a lot of positons leading bullish on Oct 3rd-4th, which were all leveraged. And I have by now cashed out all but a few of them with great profits, moving from an account value of $140K to $185K.

Clearing that out allows me to move in with up to a 4000 share bull position on each of FAZ and TZA. What that in turn allow for is to take advantage of, while holding the shorts, of going delta neutral, or even delta bullish, for the day or swing trades back up, which happen during the overall downward trend.

Over this weekend, I am holding 3000 shares of FAZ and TZA. I have no idea whether the market pulls back on Monday, but if it does I will be positioned, and if it doesn't, I will flatten this position quickly, so as to take advantage of any down movement in the options. 

I am not intent on getting every bounce back with a delta neutral position. My aim is to catch, one, maybe two, of the short-term swingbacks that will happen. The profit of these swings will effectively move higher the break-even price of the option positions, by a couple of dollars each or better. And, the other aim, is to watch my backside, incase of a total market reversal, to safe-keep profits. I'll let you know how it turns out.