That Was The Week- Bit Of A Dip But VIX Blips Up
Well, another almost predictable week in terms of chaos- surely everyone here is aware what’s going on. Market watchers may rightly assume that FTSE volatility is somewhat conspicuous by its absence. Perhaps its best to assume shorter time horizons with trades, or be prepared to cut losses quickly and live to fight another day. Fact that our trades here have continued to win is in no small measure due to ‘market feel’ based on nothing more than options prices. A certain amount of good luck helps, but also an eye on the exit too. The main thrust of all our strategies is to keep out of trouble, when we win it’s great, when we have those rare losers <5% we need to take stock- in March we took a short break not knowing where things were going.
Factors beyond control are too many to list but normally we’d have such as unemployment inflation and interest rates. These at least seem to be predictable as jobs are being lost, inflation has hardly budged and interest rates….. possibly going negative. These are small beer compared to the rest of the earth moving factors. What if there’s a vaccine next week? Want to bet against it? With all the doom and gloom we know the markets will go nuts when a vaccine arrives. I’m not betting against it happening. Or a currency crisis.Or SETI finding intelligent life, but not here!
A horrible week- bound to happen sooner or later so the system missed out. A couple of big down moves and then the 4.30 : that slot seems to unleash renewed energy. But again not on my radar. Forex remains on the back burner in the next town!
It has been mentioned many times, the sizeable volume of emails rec’d by yours truly, and again something good to mull over: https://artoftrading.net
I like the trading rules and as we oft repeat EXIT is everything . Whether it’s winning or losing, keeping an eye on the exit is key. Never mind all the psychology and flat earth conspirators. Traders of options can, of course, have an edge there too…… expiry. As Trade 192 shows this was a dream trade. However it was not looking so rosey for the first 4 days of the week and barely squeaked into profit until Friday at 10.10. I posted the options chain with settlement prices in case there was any doubt ( I think expiry calculations are always questionable, but there it is).
WEEKEND STRANGLER– sorry it was late! Nov 6200 call 63.5 Nov 5700 put 64= 127.5 premium Monday? 59 and 37.5= 31 profit Win, dammit!
This week 6100 call 63 and 5600 put 61.5= 124.5
Trade 191 At Expiry(Jade Lizard)
Remember we sold the 5675 put 36, and sold the 6000/6050 call spread (47.5-32.5) =15. Total premium therefore 51 We made 51
Trade192 Iron Strangle Fly, Iron ratio Butterfly, Iron Fly Strangle,Got it- Flyangle!
We generally don’t like to trade so close to the expiry, Friday due to PIN risk, but here it is, and the reasons why:
It’s a short iron butterfly but we sell 2x the wings. This gives us short 2x 6100calls(18×2) ,long one 6000call(59) and long 6000put(43), short 2×5900puts(16×2). Therefore 59+43=102, minus premium taken in from those 2x short wings, 18×2, 16×2 gives us 68, so our cost 102-68=34 The logic here- our risk(±3.3%) is at 5800 and 6200, but our max profit 100-34 =66 WIN WIN WIN! 78.5, cost 34
Trade 193 That Skewed Ratio Straddle
Apologies are best served as an hors d’ouvre, so here’s mine! I like to test things and again this options risk graph seemed to be a tad suspect. http://OptionCreator.com/stg60ei Skeptics, like options traders, are healthier people. Adventurers are skeptical too, perhaps that’s the driving force. Greeks and their calculationsare shown in the graphic. CME likes us using their facilities, we’re sure.
We sell 3 of the Nov 6000 straddles, and buy 2 Dec 6000 straddles. The graph looks peachy, let’s give it a whirl. Convinced of this trade I am not!