My Thursday Market-Crash Awesomeness!

by ETF Base on August 4, 2011

For anyone following my tweets, you would have seen on Friday, I bought 20 puts and 20 calls on QQQ knowing that there was going to be a BIG move in the market this week with all this debt ceiling deadline nonsense.  The problem was, I wasn’t quite sure which way, so I went long on both ends.  Additionally, I bought VXX, the volatility ETF.  Well, during Thursday’s carnage, with major indices off 4% or more, my portfolio was actually UP!  Yes, I made money on a down 4% day.  Well, I’m actually about even going back 2 weeks where the market is down 9% in 9 days.  Pretty impressive, right?  Here’s the screen shot from today.

The cash position increase you see is the 15 QQQ puts I sold during the day; I’m hangin’ on to 5 more for some more downside tomorrow.  They have Friday expiry and a 56 strike so I’m sure to make at least another couple hundred bucks on them Friday unless markets rally like there’s no tomorrow.

If It Were That Easy…

I won’t beguile you into believing any time you want you can pick up a bunch of options and make money the next week.  Markets are efficient, so options are priced accordingly.  I bought QQQ 56 puts when it was trading at 58 last week for around .22 each ($22 with 100 share control).  At the time, I thought .22 was actually a bit expensive for a strike price so far out of the money with only a week’s expiry.  Otherwise, I would have bought at the money or the 57.  But now I’m glad I went with the 56 strike options.  My gain on those is over 500% in less than a week!   But just bear in mind that most options do end up expiring worthless.

To boost my returns a bit, I had also purchased VXX.  In prior market crashes, VXX has spiked over 30% in a single day.  Today, we saw a 20% move, so that long position helped mute a substantial loss I incurred elsewhere in the long portion of my portfolio.

There happens to be a TradeKing Promotional Code going on right now you’ll want to check out.

How’d You Make Out Thursday?

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