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Check Out the Volatility in SVXY:
Every week for the past four weeks in my personal account, I have bought at least 200 out-of-the-money weekly call options on SVXY, paying $.20 ($20) for each option. In every single instance, I was able to sell those options for at least $1.00 ($100), and sometimes much more. That works out to 500% a week for 4 weeks in a row. I could make that same bet every week for the next 16 weeks and lose every time and still be ahead. (As we will see below, in half the weeks in 2014 so far, my bet would have been a winner, however).
Last week I was delighted to unload these calls because I figured that after moving higher for 6 consecutive weeks, it might be in for some weakness. Not so. The options I sold for $100 each could have been sold later in the week for $550. I left a lot of money on the table.
I shared these trades with Terry’s Tips subscribers, by the way. They were an insurance purchase as part of a larger portfolio of long and short options on SVXY. Usually insurance costs money. I expected to lose money on it. Over the past few weeks, it paid off nicely.
An interesting feature of SVXY price changes is the weekly volatility numbers. This is an extremely volatile stock. The following table shows the biggest up and down changes in 2014 from the previous Friday’s close for SVXY.
This stock is unbelievably volatile. In 19 of the 22 weeks, it either rose or fell by more than $3 (highlighted weeks). It rose over $3 in exactly half the weeks and if fell by more than $3 in 8 of the weeks.
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