- This strategy is only for those who understand the abnormal risks of VIX-related options and can accurately assess exposures. One caveat upfront, I’d never hold short calls on UVXY.
- The article describes how measuring the rate of change in the VIX futures curve can identify potential for an explosion in UVXY. It also presents a strategy to exploit them.
- As a "speculative hedge", the strategy claims monstrous gains on occasion when stocks fall, while constraining other outcomes to small gains and losses of no ultimate consequence.
- The study period is 24 months as a sample period; it includes one very big COVID-generated opportunity in February-March 2020.
- By pairing long calls with short puts, a theta-neutral position can be created with substantial upside leverage. Exposures can be constrained by three factors to be explained.
For further details see:
The UVXY Option Pair As A 'Speculative-Hedge'