Nov Hedge: VXX Calls - 20 Nov expiry

2020年10月24日

I've been thinking of ways to hedge my trades to mitigate risk as my trades are mainly naked sold options contracts. This CALL trade is the first live trade of a hedge theory I came up with. If everything goes well this should expire uneventfully.

This Trade is paid for using 15% of the total Premium from the 2 other Nov naked option trades.

I bought the strike price as the previous 2 VXX spikes was between 40-50%.

Nov Trade structure

• Trade 1 - SLG sold PUTS is aligned to the larger market direction (Bullish) and is the trade with the largest BP usage (40%). In this case, I did not utilize the full 40% as there was no reason to with my 5% monthly target
  
• Trade 2 - JETS ETF sold CALLS is opposite the market direction with a utilisation of 25% BP
  
• Trade 3 - Is the hedge. This VXX bought CALL is opposite the larger market direction and is funded from 15% of Trade 1 & 2 premiums
  
• I have left 25% BP free in case of margin usage
  
  Scenarios
• If everything goes well, my Hedge should expire uneventfully and I keep the premiums from Trade 1 & 2
  
• If things go bullish, Trade 1 will be good, Trade 2 will be at risk, Trade 3 will be uneventful and Trade 1 will lower the loss of Trade 2
  
• If things go bearish, Trade 1 will be at risk, Trade 2 will be good, Trade 3 will be good and the returns of Trade 2 + Trade 3 will lower the loss of Trade 1
  

It's not full risk coverage but the aim is to mitigate risk. Let's see how this goes and I'll continue optimizing this.

2020年10月25日

ノート

Correction
Trade 1: BP Usage (45%)
Trade 2: BP Usage (30%)
Allowance BP: (25%)

2020年12月15日

トレード終了: 利益確定目標に到達