The set-up: When you see volatility spike and have a blow-off day, a lot of people back off, expecting things to calm down. While things do typically calm down, that doesn’t usually last and you almost always see volatility pick up again quickly.
The play: I would wait for the market to calm down this morning – to where everyone thinks everything is fine again — but any time after the market is up today would be a good time to start taking a nibble on the ProShares Ultra VIX Short-Term ETF (UVXY); you don’t know what will set the market off today, tomorrow or Monday, but I do believe you will see something that will trigger the market again.
How I am playing it: My trade is on auto-pilot here. I have hedged calls on UXVY, with the Nov.17 $16 calls, and the $18 and $20 Nov. 17 calls behind it. I will be looking to add more $16 calls today.
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 on Oct. 26, he held UVXY call options as described in this article; he had no shares or open orders in the ETF but was looking to purchase more options in trading today.