Laddered Puts on $UVXY

Today we are going to do a laddered put set up on the fear index tracker $UVXY.

$UVXY has just recently undergone a R/S and this trade lets us do 3 things
1. Take advantage of the price spike that should normalise
2. Take the trade for less risk than if we went long
3. Get paid a premium rather than paying the premium

The plan on this is 2 things simply IV contracts and $UVXY decays over time. We want that volatility that is what we are really trading on this. If IV is high we want to sell if IV is low we want to buy it.

Short Put Ladder Construction
Sell 1 ITM Put
Buy 1 near ATM Put
Buy 1 OTM Put
To setup the short put ladder, the options trader sells an in-the-money put, buys an at-the-money put and buys another lower strike out-of-the-money put of the same underlying security and expiration date.

Unlimited Downside, Limited Upside Profit Potential
Maximum gain is limited to the initial credit received if the stock price rallies above the upper breakeven point but large unlimited profit can be achieved should the stock price makes a dramatic move to the downside below the lower breakeven point.

The formula for calculating profit is given below:

Maximum Profit = Unlimited
Profit Achieved When Price of Underlying < Total Strike Prices of Long Puts - Strike Price of Short Put + Net Premium Received
Profit = Lower Breakeven - Price of Underlying


Strikes being $75 short put the $55 long put spread puts me at a risk of $20 between strikes x100
the long $50 says that I expect $UVXY to be more than ($2000-$500 credit) /100

In short I expect if I sell the $75 buy $55 credit spread and buy the $50 with a credit left over $UVXY will be under $35 by contract expiration date.

Another option is if we believe that $UVXY will be lower than $35 by EXP is strongly going to happen

Short Put Ladder Construction
Sell 1 ITM Put
Buy 1 nearer ATM Put
Buy 2 further OTM Puts

Same risk as the spread is $15 with nearly no credit but better chance of higher profit if it does indeed break $35 and keep going.

I don't have a crystal ball and none of this is investment advice just some trade ideas being tossed around in our chatroom to join the conversation there enter here.

Options give you options #TradeSocially