Volatily into the Elections - Trading Journal (10.31.20)

I bring up volatility because today I went on a trade when what I should have done was to buy inverse ETF. Here are the results comparing UVXY and SQQQ. Tech was clearly falling down at the end of Thursday's close right after big tech came out with earnings with the immediate drops other than Google. So this was an easy trade to put on to be short SQQQ into Friday. What I mistakenly thought was that if big tech which has lead this rally from March was to go down than market as a whole should follow. To top it off a big fall / crash would definitely lead to higher volatility.

Comparing between UVXY and SQQQ it is clear that the latter price structure is much stronger. The peaks and valleys in UVXY throughout the day was enough extract any gains going long volatility. Furthermore Nasdaq had a pretty bad down day up until at the close with a ramp. Same goes with SPY.

The VIX tracks the SPY option premiums so off the bat I cut off my opportunity to profit going short by going with the strong index SPY versus SQQQ. Furthermore when it was too obvious I always feel the play won't happen. Well I was somewhat right as overnight trading did have a mini-crash, it was bought up right before markets opened. Then as session trading began the market pretty much sold off. This is likely the part of opportunity for market makers to suck out put premiums at open and buy their own puts to capture what would be a pretty strong down day.

VIX overnight exploded but as the trading session started it had recovered overnight losses so getting into UVXY after trading session of Thursday was a higher buy. The tech earnings had already resulted and markets was dropping so it was not ideal to go buy UVXY overnight. Instead it should have been purchasing SQQQ.

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