Tuesday, August 16, 2011

Trade Update RI29 and XIV - FTSE CALL and Inverse Volatility

I have just closed my position in RI29, the trade has returned 18% after costs for a total of 649 Pounds. Not bad for four days - thats around 30 years worth of interest if the money was left in a checking account !
My reason for closing the trade is that I do not want to hold the position through the France/Germany meeting taking place oustside market hours this evening.

Twice in the past two weeks I have seen a European monetary offical and a US President talk 4% out of the market. I do not want to be on the wrong side of that with a leveraged position like RI29.
I may reopen a position in Ri29 tomorrow or take a counter position in New York this evening. My guess right now is that the European meeting will drive more money out of the market which is why I am out of RI29 for tonight. If Europe somehow comes out with a positive suprise I will be happy to open a larger position in RI29 in the morning.

I will also be watching XIV, I still have some money in this position, if the news tonight is good a lot of fear will come out of the market and XIV should move strongly higher. If the news is bad, XIV will take a major hit in which case I will double down as VIX has the unique property of always reverting to mean. See my post on the 'Fear Trade' for the reasoning behind doubling down on XIV if it dips.

See links to the right for product information on RI29 and XIV.

See links to previous articles or use the search option to find previous posts relating to the RI29 and XIV trades.

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