The back story: Just over a week ago, I talked about how the ProShares Ultra VIX Short Term Futures ETF (UVXY) was poised for a good three-day trade where a gain of 10 percent or more was possible. Now’s the time.
The set-up: Up to this point, every time the market has taken a break off the top, it has come back and gone higher. Now, however, it has made a multiple top. It has tried to break through multiple times and failed, with every little rally or attempt to regroup falling apart quickly.
The play: I bought some UVXY – which I have been playing off and on for a few weeks – on Thursday, and am planning to buy more today (I now have 2,000 shares at an average cost of roughly $29.50), most likely around $30. It’s a short-term trade – three days or less – but I think we will see the UVXY up at $35, so it has more than 10 percent to run at this point.
If the market does come back and make its old highs again, I’ll get out, but I think the market makes another leg lower here.
The wild card: Apple (AAPL) reports earnings on Tuesday. The market didn’t like what it saw from either Alphabet (GOOG) or Amazon.com (AMZN), and while I am not making a call on Apple earnings, I suspect that the market won’t like them no matter what the news is. That could impact the market, so the longer I hold UVXY as that news draws near, the more I will factor it into my decision of whether to hold or sell my position.
Jeff Bishop is lead trader at TopStockPicks.com. He runs short-term trading strategies, primarily using leveraged ETFs. At the time this was published on RagingBull.com, he held 2,000 shares of UVXY, with an average purchase price of $29.50 per share. He has no open orders on the ETF, but is planning to buy more if the market moves as described in this article.