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Third lifetime as a trader. First was pure rookie '97-'01. Rode the express. What times. Blow out gains followed by blowout losses. Primarily on penny stocks. Second was March '09 to Dec '11, rinse, repeat with learning how to trade options -- everything, every which way. Over... More
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  • Volatility beats bearishness
    Here's the recap on the week for financials:  "Financials were also the biggest losers for the week, shedding a combined 5.4%."

    Now, if that were the case, than FAZ should be up 16% for the week, right?  If that were the case, then FAZ would have closed the week at $41.94, from last weeks $36.16 but instead closed at $40.97-- contango at work.

    An update on the strategy-- a rather quiet week of watching the tape and seeing how it works, with a couple of flips in FAZ and TZA underlying, and one in VZZ too. That made a profit of about $5K total. Here's how the short options open profits are standing:


    Down a bit from last week, but that's to be expected.

    In addition to the Jan options, I had sold some naked Nov calls in FAZ and TZA, which I closed last week. So calculating the current break-even point:

    FAZ-- $38
    TZA-- $27.50

    Next week, things could continue in the volatility, which would be great. Right now, here are the break-even point that correlate to XLF, for FAZ, and RUT, for TZA:

    XLF-- $13.50

    Too bad that I have not been pointing that out since the posting here began. If you were to look back OnDemand on ToS, you could find that number continually lowering itself. During this past week, the XLF point went down .22 cents.

    I think a more likely scenario is a decrease in volatility, and a decrease in contango, and a slower grind upward to north of 1300 on the SPX.  76 days to go. 

    Tags: FAZ, TZA, VXX, xlf
    Nov 05 5:28 PM | Link | Comment!
  • TZA, FAZ, bear 3x mega gain
    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.

    Oct 29 1:27 PM | Link | Comment!
  • Update on 3x strategy with delta neutral learning curve
    This is a market that many want in, and as long as it stays that way, its the best place to be. And for the 3x bear etf's, its the worst place to be. I wasn't able to get into all of those I listed, because a pullback didn't happen. I am not surprised. What I did manage was two of them, along with a volitility vehicle, for shorting in the options.

    The holdings are:

    VXX: short calls in Dec and long puts in Dec
    FAZ: short calls in Jan and long puts in Jan
    TZA: short calls in Jan and long puts in Jan

    I've a delta positon of about 1000 for FAZ and TZA and 800 for VXX. There is a lot of upside to be made in the downside given the trend in place now.

    Here are a few of interesting developments since I initiated the trade that I'd note:

    Holding the short on options allows me to go long on the underlying without near the amount of anxiety about entering and holding a profit as under usual circumstances. An example. On Friday, Oct 14th, before the close, I took out a short position on FAZ of 1000 shares, effectively delta neutral positioning. On Monday the market gave a long red candle, and I was able to sell that FAZ much higher than I bought, from about 51 to about 55. The trade didn't profit me $4k, as I lost that amount of paper gain on the short options. What it did do was effectively put the profit in the bank, or, looked at another way, lowered my breakeven point on the FAZ options by $4. This was my first experience of trading delta neutral, and I could tell from the experience that it will not be my last.

    I was able to add TZA to the list in a rather risky, but ultimately profitable manner. Also on Friday the 14th, I bought 1000 shares of TZA at 36. On Monday, when TZA hit 39, I took out a short position on TZA of 1000 delta. Since I'd just made $3K on TZA, I effectively managed a 42 entry. Now, that was about the same price I could have gotten last Monday, after the initial post here, so I'll take it.

    I also performed a similar trade with VXX as the above, entering and selling shares for a net gain of $2 to the underlying profit. I've a smaller delta there of 800. I am not quite as comfortable with VXX as with holding these 3x bears, and this is just through Dec, but I will hold to it regardless as its profitable.

    Now, in managing the trade, I have to contend with days like today, the 18th, where FAZ moves to the downside back into the 40's, and TZA to the mid 30's. I have gotten used to now putting in triggers to buy the underlying and go delta neutral. I have them placed a few dollars above the current price, at least. I will likely widen that with a few days or a week of sideways to up action by the overall market. The delta neutral strategy is nice for adding a bump to the bottom-line of profit, but you can imagine how it can also take away if ill-timed.

    I am looking out for another candidate to add here by the end of the week. 

    Tags: VXX, TZA, FAZ, etf
    Oct 18 10:46 PM | Link | Comment!
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