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Volatility Trades

  1. jongo

    2,033 Posts.
    This week my plan with SPXL and SVXY, which I opened long trades in on Monday night, was to run loose stops up until the NFP on Friday night, then set tight profit protector stops. The reasons for this plan were discussed on the oil thread last Monday. I stuck to this plan and subsequently both SPXL and SVXY were stopped out while I slept due to the NFP being overcooked. That is, due to the high January NFP and the significant upwards revision of the December NFP number, the yanks started fretting over the possibility of interest rate rises, hence, the SPX tumbled and took SPXL and SVXY with it. I was hoping for the SPX to close above 2065 because that would have triggered all of the breakout traders and the SPX could have jumped to a new and higher trading range at 2100+. Although the dream that the SPX would break out above 2065 did not materialise, this week has resulted in excellent profits being banked with SPXL and SVXY.

    What opportunities will next week bring I wonder. Too early to tell right now, but by Monday night there will probably be sufficient news out there in the business media to assess the short term direction. The SPX has been ranging from mid-December to the present, and with the range over the last month being roughly 1990 to 2065. Hence, it is probable that the SPX will either break out above 2065, or retest 1990 again. At present I suspect the latter scenario will play out, hence, Monday night may be the time to open a long trade with SPXU and UVXY. Actually, the better time to open with SPXU and UVXY was probably last night, but anything could happen over the weekend.

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