Today's saga starts on January 24th, just two days ago but it seems like last week. I had just, the day prior, added to my core short TVIX position to raise the number of shares from 2,000 to 2,500 as you see in the portfolio graphic below. The price for that lot of 500 was $6.26. This will be revisited later in the post.
First, let's dispose of the TNA story. You'll see that standing out at the top of the graphic like the subject of a "which of these things is not like the other" song. TNA is also a little reminiscent of TNT, and that's not a ticker symbol, that's more like:
Just before one in the afternoon, I got it in my head to short TNA because I thought it wouldn't climb higher and I wanted to paid for that failure. I got one thing right but I didn't get what I wanted out of it. TNA didn't climb any more that day, but in order to avoid paying for the venture, I had to wait until after hours to get out with a couple of dollars in my pocket. And a wise move that turned out to be, because the next day TNA kept right on climbing like I thought it wouldn't, to right around 106.50 before cooling off. I'm glad it climbed without me, because I don't like paying to take a "heck" ride.
The other oddity in the portfolio (above) is the 26 strike UVXY short put. That same day, close to noon when UVXY was trading at about 26.30 or so, I sold 2 puts for the following week's expiration for the 26 strike for $1.37 premium each. My plan was to cash those in quickly on any substantial bounce, but UVXY just kept on dropping. Check the price now (or as of my writing, which is Thursday, January 26th in the afternoon.) UVXY is now 23.95.
Now see the portfolio graphic above. This was taken the next day, January 25th, when my 26 puts had gotten substantially away from me, and UVXY was hovering above 24. I did a repeat by selling two of the 24 puts short for $1.01 in premium each.
Later on January 25th, I saw TVIX hitting a level so low (the same level where it sits at this moment) that I was inspired to bring in that addition to my short made two days prior. I judged the return to be so good within just two days that a retracement would be likely - if not immediately, then pretty soon. The chance of missing out on more return seemed expendable in this case (due to what I estimated to be its relative unlikelihood) compared to the benefit of locking the profit in; so, that much -and only that much - of my TVIX short, I booked as such:
As seen in the graphic below which was captured today, the 24 strike puts are no longer my problem; I bought them back to cover at exactly the price I had received for them. Though they would have been the more logical selection to keep rather than the 26 puts, I wanted to clear some clutter off my table and wanted to lessen my risk exposure. Next I mulled over a plan to make my short puts less risky, possibly by making them covered. One alternative was to simply dump them for the loss you see below ($161, and I hate taking losses). As I cogitated and calculated, UVXY hovered around 24.76 for a good long while, almost as if it urged and beckoned me to go ahead and make my move. So I went ahead and shorted 200 UVXY at that price, making my two short 26 puts covered, even at a disadvantageous price. The reason I call that disadvantageous is:
If expiration day comes seeing me refuse to trade in the contracts and UVXY remains below $26, I'll be assigned, which means I'll have 200 shares of UVXY put to me (long) at the contracted price of $26.00 even. I would think of this (or rather, I'd finagle it to come out this way) as buying to cover my 200 shares short, which obviously I just transacted at 24.76. This would represent to me a loss of $1.24 per share of $248 total. Keep in mind, though, that I received $264.65 for selling the two put contracts in the first place. This would net out to being essentially flat. I made this move today, shorting the 200 UVXY, to "lock in" a guaranteed outcome of no money lost to me, should UVXY stay below $26 and should I hold the puts through expiration. Naked, the puts could cost me any amount of money, limited only by how low UVXY may drop between now and expiration. Covering them made the downside (meaning: UVXY dropping lower) worst-case scenario outcome known to me.
On the other side, though, having these 200 shares of UVXY short exposed me to more risk, since UVXY could rise above $26 (and to any level higher that it might feel like, especially during one of its regularly-occurring temper tantrums.) And my only consolation would be the $264.65 pushed to my side of the table for taking on the puts. In this case it would be great for the puts to be uncovered. Who wants more ultra volatility shares short than they can handle during an unexpected and vicious volatility spike? As you can tell, I have UVVS on the mind frequently; I have to keep it in mind to avoid being ensnared in a UVVS to a degree that it'll harm me.
To that end, while typing up this post, I closed out the 200 shares you see above, making my puts, once again, under-dressed for the weather. I wish I could say I caught the bottom of the UVVD (unexpected and vicious volatility downplunger) that took place from 2:00-2:40 today, but I got most of the move. I'll try to scalp some more day trades or short-term trades before the expiration of my short puts and see if I can offset any loss I'll incur, should the puts turn around and bite me with the teeth they're showing me right now and have been showing me pretty much since the moment I took them on.