event trading starring VXX

The $VXX is the iShares S&P 500 VIX Short-term Futures ETN. It is meant to be a short-term trading vehicle under most circumstances (unless you do a long-term short for decay purposes). I wanted to use $VXX for a trade into the NFP number (the event for today) so I put this trade on yest:

VXX_trade_NFPHere is a breakdown of this trade:

  • I am long the June 7 weekly 20 Call
  • I am long the June 7 weekly 20 Put
  • I am short the June monthly 21 Call
  • This trade paid a $.22 credit so I start out ahead

The structure of this trade allows me to capture a move in either direction on Friday with only the upside being capped. In order to finance the weekly Straddle I had to sell some premium to pay for it and this forces me to have a bias (even if it is slight). I chose a fade in $VXX as the likely result so selling the Call premium was the right play.

At the moment $VXX is trading under 19.50 so the Put side is winning so far. My intention is to manage the weekly straddle today to pull out of it what I can and then use those proceeds to put on a new trade for the weekend fade (leaving the short June 21 Call for now).

Leave a Reply

Your email address will not be published.