200 W/e 18 Dec Strangles, Ratios, Butterflies

That Was The Week- Typical Expiry Rewarding Strangles, Ratios, but not the Butterfly

Looks like expiry was about 6600

The above is a one minute chart up to the 10.10 expiry -oddly the timestamp at the bottom reverts to 06.47 etc. It’s meaningless, the point is, the action is generally upwards and only rarley does it zip around trying to take out ‘stops’. We don’t have stops other than what’s in our head, but limit orders.

So we are no wiser, Brexit, Covid, Trump all unknowns. The latter however, is remarkably quiet, and this may presage some more craziness. One couldn’t possibly comment. Curiously I have had emails this week suggesting that if one does not need to trade, it might be a plan to sit it out, until after 20th Jan

Caveat: Just an opinion. Nothing more. We do not give advice.

200 Trades. Time To Reflect

So at this particular milestone, time to take stock. Winners and losers. Readers of this site will know that losers are like hen’s teeth here. However a search through the record failed to turn up many losers, but the official total is certainly <20. The worst of these (we found 6 but there’s more)  lost 31.5, then 30 and 28. The remaining 3 lost 3,2.5 and 1. More importantly of those losers it was stated in advance that these were not trades we liked but for the sake of having a weekly trade we would include other people’s strategies. Ironically this week’s butterfly was a loser! ( I did suggest a cheeky strangle to pay for it)

The win rate is NOT, repeat NOT simply an idle boast “oh look how clever we are”. It’s about options trading and the edge we can have, over other ways of trading.

When making a trading decision you do not have to take a directional bias with options. This is well established theory, but if one were to trade directionally the longer the timframe the better the decision you are likely to make. Momentum is a powerful thing, as market trends can be easy to discern on a yearly basis- just go long with a tracker/stock. On a daily basis the randomness cannot easily be quantified. Distraction trades came back this week, who knows why? A couple of good winners,same recipe.

200 Trades What Next?

Weekly trades are fun, educational and hopefully thought provoking. Our aim has, from day one, been to educate, and enlighten. Frankly getting people enthused about options trading is really painful. Somebody wins £10 on the lottery and they will spend another £1,000 chasing that dumb win!                  It is painfully obvious that making money from trading is far from simple. Entry to trading and blowing that cash is a matter of minutes.                           Entry to options trading is arduous and there are no bells and whistles for us UK traders. However with the options chain and calculator https://auth.cmegroup.com/idp/startSSO.ping?PartnerSpId=https%3A%2F%2Fwww.cmegroup.com  We have all the tools we need to trade FTSE, provided we have modest information and charting of our index. That, at least, is readily available.

Legacy Trades,196, 197, 198,199

Trade196  We Abandoned the Weekend Strangle for a 2-3 week Time Horizon

We  sold the Dec FTSE  6600 Call for 25.5 and the 5850 Put for 25  Credit therefore of 50.5. Here’s the spin. We ‘cautiously’ looking at closing out at 25% of premium and 50%.

Week one? 20.5 for the call  16 for the put   Win, by 28% of premium or around 5% of margin employed- simple isn’t it? Until it isn’t. The picture changed, but we didn’t. OK We got more than the first target of 25%. Then we ran it:

Last(2nd) week– 6600 call  74.5 the 5850 put 11 –ugly loss 35 

6600 call now 50 5850 put 5 still in loss- the lesson was…take the 25%! 

But, we had a chance to adjust.  Shifting our strikes up. 6700 call 40.5  6300 put 35.5.(Credit 76)  =9.5 debit. Our credit however remained 50.5-9.5 =41   Now 6700 call (18)and 6300 put (20.5) (Remember we have only a credit of 41 ) So a small credit 41-(18+20.5)= 2.5

Expiry worthless so….WIN 41  with adjustment, but we could have simply run it to expiry for the 50.5. We all have our own stress tolerance.

Trade 197 Spicy as we could handle

Our  ratio calendar : we  sold 2x the 19 delta 6100 Dec Puts and bought 1 Jan 6100 Put, for a debit of 77-(35.5×2)= 6

Last week  18.5 for the Dec put and  51 for the Jan so 51-(18.5×2)= 14 Credit 

Now 9.5 for Dec put and Jan  put 51 -Nice! (OK I’m bewildered as there has been zero theta decay on the Jan put) Credit 32 Close out or run? WIN

Could have collected maybe 35 at expiry- but PIN risk is such an unknown. CREDIT 29 WIN. 

Trade198

The trade is simple- take in a credit of 50 and risk 50 to the upside. Ugly part…the naked put. We sell 6600 call and buy the 6650 creating the short spread for (74.5- 55.5)= 19. We then need to sell a put worth 31…. 6275 at 32. Risk therefore to the downside at 6224.(We took in 51)

And now, the 6600/6650 call spread ( 50 – 31 )  19  6275 put  18.5 so it’s made 12.5, but we sit tight. WIN

WIIIIIIIIIN!  OK this seems to be a good expiry trade, and it has made the full Monty- more than compensating for the daft butterfly.

Trade 199 Getting close to the 200 Mark. How many losses? <20.(it’s a pain to check!)

It’s a regular butterfly we buy the 6600 put, sell 2x 6500 puts and for protection buy the 6400 put. Prices as shown 105.5+34.5= 140 minus 60.5×2=121. Our debit, therefore is 19, for a max score of 100. We might take anything over 40 prior to expiry, but this cheapskate might sell a very far OTM strangle to reduce our cost. EG: 6750 call 6150 put for credit 21. There would be no protection at these strikes, note

LOSER!!!!!!!  However this wily old fox would have sold  that strangle as expiry week is usually a low volatility non-event- so we’d have made a credit of 2!

Trade 200 It’s Not For The Faint Hearted

This is a strategy that comes from a fellow trader who holds prime accounts and he got it from a guy who meta guy who knew this trader who had a strategy!

Caveat- we have been tracking this for a few months and it has had sevral big wins and weeks of losses. It is a weekly trade and it is the… Pitchfork.

Simply, it’s a short deep ITM call and 3 (three) short puts First issue: It has to be placed on a Monday,so we will have to report from a live market. To compensate here’s this last week’s trade(Monday 14th). 6300 strike 325+(83×3)= 574   now 285+(64 x3). =477 Credit 97. That is £970 based on one lot! As you can see the premium taken in is substantial the timeframe 4 days. Sounds too good to be true. That’s because it has a lot of losers, but all will be revealed in due course. It’s a cliffhanger, but don’t expect fireworks next week

 

 

 

Options give you WINS! 

 

1 Comment

  1. As captured this morning -prices for Trade 200 but seriously, this may not go well as they are highly variable and unknown.
    Strike 6150 355 for the call and 59.5 (x3) for the put
    or
    Strike 6200 314 and 69(x3)
    The above for January expiry – the calcs to be shown in due course

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