On Wednesday of this week, a VIX spread I recommended for paying subscribers expired after only 3 weeks of existence. It gained 70% on the investment, and it is the kind of spread you might consider in the future whenever VIX soars (usually temporarily) out of its usual range because of some upcoming uncertain event (this time it was the election that caused VIX to spike).
In addition to telling you about this spread so you can put it in your book of future possibilities, we are offering a Black Friday - Cyber Monday special offer to encourage you to come on board at a big discount price.
How A VIX Spread Gained 70% in 3 Weeks
VIX is the average implied volatility (IV) of options which are traded on the S&P 500 tracking stock (SPY). It is called the “fear index” because when market fears arise because of some future uncertain event, option prices move higher and push VIX up. Most of the time, VIX fluctuates between 12 and 14, but every once in a while, it spikes much higher.
Just before the election that took place on November 8, VIX soared to 22. I recommended to my paying subscribers to place a bet that VIX would fall back below 15 when the option series that expired on November 23 came around. Here are the exact words I wrote in my November 5 Saturday Report:
“When VIX soared to above 22 this week, we sent out a special note describing a bearish vertical call credit spread which would make very large gains if VIX retreated toward its recent average of hanging out in the 12-14 range. As you surely know, you can’t actually buy (or sell short) VIX, as it is the average implied volatility (IV) of SPY options (excluding the weeklies). However, you can buy and sell puts and calls on VIX, and execute spreads just as long as both long and short sides of the spread are in the same expiration series.
You are not allowed to buy calendar or diagonal spreads with VIX options since each expiration series is a distinct series not connected to other series. If you could buy calendars, the prices would look exceptional. There are times when you could actually buy a calendar spread at a credit, but unfortunately, they don’t allow such trades.
Vertical spreads are fair game, however, and make interesting plays if you have a feel for which way you think volatility is headed. Right now, we have a time when VIX is higher than it has been for some time, pushed up by election uncertainties, the Fed’s next interest rate increase, and the recent 9-day consecutive drop in market prices. This week, when VIX was over 22, we sent out a special trade idea based on the likelihood that once the election is over, VIX might retreat to the lower 12-14 range where it has hung out most of the time recently. This is the trade we suggested:
BTO 1 VIX 23Nov16 21 call (VIX161123C21)
STO 1 VIX 23Nov16 15 call (VIX161123C15) for a credit of $2.60 (selling a vertical)”
This spread caused a maintenance requirement of $600 against which we received $260 for selling the spread. That made our net investment $340 (and maximum loss if VIX ended up above 17.60 on November 23rd.
It worked out exactly as we expected. VIX fell to below 13 and both puts expired worthless on Wednesday. We pocketed the full $260 per contract (less $2.50 commission) for the 3 weeks. How sweet it is. We also placed the identical spread at this $2.60 price for the series that closes on December 28 (after the Fed interest rate decision has been made public). With VIX so much lower, we could close out the spread right now for $75, netting us a 51% profit. Many subscribers have reported to us that they have done just that.
And now for the special Black Friday – Cyber Monday special offer.
Black Friday/Cyber Monday Special Offer: As a post Thanksgiving special, we are offering one of the lowest subscription prices that we have ever offered – our full package, including several valuable case study reports, my White Paper, which explains my favorite option strategies in detail, and shows you exactly how to carry them out on your own, a 14-day options tutorial program which will give you a solid background on option trading, and three months of our Saturday Reports full of tradable option ideas. All this for a one-time fee of $69.95, normally $139.80 (not including bonus reports).
For this low-price Black Friday/Cyber Monday $69.95 offer, click here, enter Special Code BFCM16 (or BFCM16P for Premium Service – $199.95).
If you are ready to commit for a longer time period, you can save even more with our half-price offer on our Premium service for an entire year. This special offer includes everything in our basic service, and in addition, real-time trade alerts and full access to all of our portfolios so that you can Auto-Trade or follow any or all of them. We have several levels of our Premium service, but this is the maximum level since it includes full access to all nine portfolios which are available for Auto-Trade. A year’s subscription to this maximum level would cost $1080. With this half-price offer, the cost for a full year would be only $540. Use the Special Code MAX16P.
This is a time-limited offer. You must order by midnight Monday , November 28th, 2016. That’s when the Black Friday/Cyber Monday offer expires, and you will have to go back to the same old investment strategy that you have had limited success with for so long (if you are like most investors).
This is the perfect time to give you and your family the perfect Holiday Season treat that is designed to deliver higher financial returns for the rest of your investing life.
I look forward to helping you survive the Holidays by sharing this valuable investment information with you for our first ever Black Friday/ Cyber Monday Sale. It may take you a little homework, but I am sure you will end up thinking it was well worth the investment.
P.S. If you would have any questions about this offer or Terry’s Tips, please email Seth Allen, our Senior Vice President at email@example.com. Or make this investment in yourself at the Black Friday/Cyber Monday sale price – the first time this has been offered in our 15 years of publication – only $69.95 for our entire package. Get it here using Special Code BFCM16 (or BFCM16P for Premium Service – $199.95). Do it today, before you forget and lose out. This offer expires at midnight November 28th, 2016.
Tags: Calendar Spreads, Calls, diagonal spreads, implied volatility, Monthly Options, Portfolio, Profit, profits, Puts, Risk, Stocks vs. Stock Options, Terry's Tips, thinkorswim, VIX, Volatility, VXX, Weekly Options