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No worries, you're not the only one. I'd say about 90% of people don't understand the $VXX. The allure of playing "volatility" seems exciting because it is a trendy and sexy thing to do, if that makes sense.
Playing volatility is a difficult thing to do and many don't get it right (including Mikey and myself yesterday). Still, when played correctly it can be fantastic.
Posted by Imapuppy Friday, June 29, 2012 7:50:56 AM
$AAPL calls today anyone? Window dressing, earnings runup, and it hasn't moved much.
This was followed by countless posts where I was alerting (along with others) $AAPL calls...
People post some good plays on this board, but if you really want insight from the top traders then I agree the chat is probably the way to go. I still think you can be successful doing your own thing. Just study and constantly keep learning and it will come. You can paper trade while you learn or just trade small amounts.
Excellent call bud
Understanding Contango vs. Normal Backwardation...
This is important, specifically when dealing with futures and futures derived ETFs (such as $VXX, $UNG, etc.) To gain an understanding as to why certain ETFs move in certain ways when their underlying asset is moving at a different pace. Hopefully this helps some of you guys and at the same time you can learn an important lesson in futures trading!
Suppose we entered into a December 2012 futures contract of $XYZ, today, for $100. Now go forward one month. The same December 2012 future contract could still be $100, but it might also have increased to $110 (this implies normal backwardation) or it might have decreased to $90 (implies contango). The definitions are as follows:
Contango is when the futures price is above the expected future spot price. Because the futures price must converge on the expected future spot price, contango implies that futures prices are falling over time as new information brings them into line with the expected future spot price.
Normal backwardation is when the futures price is below the expected future spot price. This is desirable for speculators who are "net long" in their positions: they want the futures price to increase. So, normal backwardation is when the futures prices are increasing.
That's essentially correct lasernat.
High premiums on options prices mean higher implied volatility because there will be an expected diversion from the mean. I actually explained this in a lengthy post a few days ago if anyone wants to read it. The higher the options prices, the higher the $VIX, and generally the higher the $VXX (though this measures the futures price and takes contango into account as stated by retiredMM).
If you were to study options more, perhaps you would become a "pro" and could teach the rest of us a thing or two? ; )
Ding ding ding! We have a winner. I wanted to post something similar to this yesterday but was busy. Nice one MM.
$VXX bottoming
You're tellin me..still going to stay away though.
The idea was right Mikey. Needless to say the thing is diving when it shouldn't be.
You put a hex on it!
Also $BBY puts could be good here, though I'm staying away.
$SPY running like wildfire now.
Out $X 21 weekly calls @ .28 from .25
Blah. I'm done for the day.
Go on $X...
Not for the amount of contracts I'm trading unfortunately :(
I'm lucky I'm on free trades right now or else I'd probably be slightly green, if at all.
I'm lucky if I can stay away for more than an hour, much less a day :D
Wishful thinking though, its like a ghost town today.
"May not even turn on the pc tomorrow."
Lol, I feel the same way.
Lots of contracts being bought up here..
$X weekly 21 calls .28 x .29
In $X weekly 21 calls @ .25
In $X weekly 21 calls @ .25
Looking for a squeeze towards EOD here.
I've made a grand total of $266 today in 6 trades, yippee! *roll eyes face*
Ridiculously slow day today. Just waiting and waiting and waiting..
Wow, $VXX hitting new LOD..sigh.
In $VXX weekly 15 calls @ .32
$SPY weekly 137 calls out @ .37 from .32
$SPY 137 w calls .35 x .37
In @ .32
$SPY calls for the short term..
137 weeklies @ .32
Nice trade, I think the monthlies have a really good chance of being a multi-bagger here.
Sick call golf!
Here comes the bounce..
I would stay with it, good chance for a little rebound so that you can cover without loss or small profit.
Interesting..
Yes.
Which is why I dumped my weeklies and held on to monthlies. Could easily get a "QE3 hopes" bounce. Bad is good, good is bad, going to be mixed trading today anyway because construction numbers posted a nice beat. Market would just rather factor in PMI
For those wondering, the sudden drop is because the US Manufacturing numbers were the worst since July 2009.
Out $VXX 6-July calls @ .45 from .31
Still holding July monthlies..
$VXX going..
$VIX up small while $VXX diving, tell tale sign. Markets being taken up on light volume, sign of things to come. Suggest $VXX monthly calls strongly.
In $VXX 6-July $15 calls @ .31 & July $18 calls @ .30
Feel pretty good about these entries and will average down if needed.
$SLV & $GLD puts again, $VXX July calls (might go large on these, looking for a good entry.) I'll be actively looking for others today, getting a late start unfortunately :/
Still have a couple positions from last week including $GE July 21 calls.
Good morning boys and girls! Time to make some moneyyyyy.