More Downside; More Protection


S and P 500 mini futures daily chart

Watching the futures grind higher overnight, I was given reason to conclude that the crawl might resume along the former short-term trend line. Alas, the market reversed course this morning.

I decided to add a VXX straddle at the 46 strike of the March 14 expiration. The risk graph appears thus:


A risk graph of a VXX at the money, March 14, straddle

The VXX ETF is in perpetual decline due to its construction in relation to the volatility futures.


VXX weekly and monthly charts.

However, the VXX could once again reach 50-55 lickety split.


The VXX daily chart

It could also subside just as quickly. Any sudden turn in the Ukrainian situation would make the trade highly profitable. If the VXX moves nowhere, time decay of the options will render the spread a loser. I am not surprised by anything in the market, but the latter possibility seems the least likely of the three outcomes.



British supply ships at the roadstead of Balaklava during the Seige of Sevastopol

History haunts all efforts to defuse the situation surrounding Sevastopol.

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s