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Trading SPY & VXX 'Weeklys' Options

Clinton Alexander Author is a PRO member Rank: 45 Followers: 20 Votes: 40 Years Member: 1 Last Update: 19 June 2013, 0:27 Categories: Market Breadth Analysis
Day Trading
ETFs

'Small Charts' because I am often mobile and use charts that fit on my notebook screen. 'Big Profits' because I trade weeklys SPY & VXX call options and the percentage gains are relatively big (as are the losses).

I trade weeklys options to leverage delta (sensitivity of option price to changes in underlying price) and gamma (rate of change of delta), exploit vega (sensitivity of option price to volatility) and to take advantage of short-term price memory. Prices exhibit memory over very short term periods, such as one day to the next (Mandelbrot). 'Weeklys' are perfect for capturing these short-term trends that last anywhere from a few hours to a few days and occur in high volatility environments. This type of trading is highly speculative and comprises less than 1% of the total financial portfolio.

The first half of the charts are indicators that provide macro breadth useful for longer-term investing; then there are charts for $VIX, SPY, and VXX that I use for trading weeklys. In the annotations, generally speaking, bearish/sell notes are made in a shade of purple, bullish/buy notes are made in a shade of green, and neutral notes are made in a shade of blue. Additionally, shades of green are at times used to represent SPY, while shades of purple are used to represent VXX.

Outside of trading, I work, sail (race), golf, garden, and study (CFA and cog-sci at Cal).

o0O~O0o

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00000 - Intro

'Weeklys' options are CBOE options that expire every week. They are usually listed on Thursdays and expire nine calendar days later on Friday. Weeklys
are not listed on weeks where monthly or quarterly options expire. I just trade calls for the most part. The reason I trade VXX calls instead of SPY puts
is that the VXX calls have the potential for larger gains because they are more volatile.

00000.A - Macro Indicators

In an ideal macro market mix, purchasing power and equity investment are appreciating, while costs of materials and borrowing are depreciating. Appreciating
purchasing power means companies can buy more with the same amount of money; combined with decreasing costs, the value of a company's liquidity is
amplified further, allowing it to expand its profit-generating activities. Equity investments that are appreciating provide a long-term cushion for the company's
finances. The macro indicators in the chart are 'indexed' to the most recent long-term bottom of purchasing power because it is the most systemic element.

00000.B - Economic Indicators

00000.C - Economic Indicators

00001 - $USD - Daily

The US Dollar Index is a measure of the value of the United States dollar relative to a basket of foreign currencies. It is the weighted geometric mean of dollar
value vs the Euro (58%), Japanese yen (14%), British pound sterling (12%), Canadian 'loonie' (9%), Swedish krona (4%), Swiss franc (3%).

00001 - $USD - Zoom Candle View

00002 - $USD - Weekly

00003 - $USD - Monthly Heikin-Ashi

Starting in 2003, the US dollar and the S&P500 have generally moved inversely to one another. Equities will weaken if the dollar strengthens and the negative
correlation persists. Alternately, we could see the correlation reverse and turn positive.

00004 - $GOLD - Spot Daily

00004 - $GOLD - Spot Weekly

Between gold and silver, I would rather trade silver because it is more volatile. I don't trade either metal very often.

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