FAZ and FAS - A trading strategy

I think I am going to try the below strategy when I get the chance.

Wait until FAZ or FAS spike significantly one day.  Probably should have done this when FAZ was up 3 days in a row and spiked to $5.37.

However, wait until FAS spikes up today and then short it.

Then wait until FAZ spikes and short it.

You are then locked in at permanent gains and then as decay takes place your gains get larger and larger.

A working example:

On May 29th the combined value of FAZ and FAS was $14.70

After yesterdays closing the combined value was $14.07 . . . or a modest 4% gain due to decay.

However, if you short at right time each you can really build on those gains.  Just a thought. 

Good trading. 

I wonder if that decay keeps consistent or it is due to a drop in volatility and the VIX?

Or as options expire and are renewed that the pricing is influenced?

Yeah I am really not sure.  Just know that the decay is there.  I mean when both of these things started back in January or so both were in the 40s.  Now look at them! 

Not sure how they will fix this.  Maybe a reverse split?

For this strategy to work though you want it very, very volatile as that is how you really get the decay to work.

Now, I wonder how it would work if say FAZ were to double to $10 at some point.  That is the only thing you need to worry about.

I guess for that to happen FAS would have to plummet.  But this strategy is to only be employed for a month at a time where you can probably get a nice 10% gain.

I threw a couple trades out there today.  Shorted FAS at $9.37 and FAZ at $4.93.

So . . . we shall see what happens.  Nothing big.  Just a couple thousand on each as a test run to see how it works. 

I think the only way you "lose" in this strategy is if the market goes on an incredible tear in either direction.  Sort of like when FAZ rose from 40 to 200 . . . and then on the flip side when FAS rose from 3 to 12.

9 weeks in a row up (or down) could cost one in this strategy.

However . . . I think we are going to muck around for a while in this trading range of 8000 to 9200 . . . i think. 

I'll let you know how I make out.  Just a small amount invested.  You have my starting points though.  Obviously I hold more FAZ shares than FAS.  almost a 2 to 1 ratio.

The best thing for this strategy is to have the market go up 20% one day . . . then down 20% the next day and repeat.