203 W/e15Jan Expiry. And Wins, Yet Again.

That Was the Week- Expiry Dearth of Good News

Little need to comment as we plod on in the hope that vaccines and common decency will end the virus. Markets were somewhat subdued but with the US on crazy valuations, and a new President on Wednesday, so many unknowns. So many unquantifiables. Data presentation continues to cause concern. Daily infections suggest testing in the region of almost a million a day. Doesn’t seeem likely and I’m probably completely wrong. However, you can make up your own mind here: https://www.worldometers.info/coronavirus/country/uk/


America’s Mounting Chaos

So, the crazy may end inside the White House, but the US is braced for more crazy on the outside. Joe Biden deserves maximum respect for stepping into the fiery furnace/lion’s den/plague. Some terrible legacy from the Trump madness- the debt and chronic mismanagement will take some handling. However much we like to think there are some very smart people in government, they will need great intellect and courage. The UK? We just bimble along with Bojo’s bumbling boobies (no particular bias, view based on performance) However our concern is again simply about trading index options,and trying to remain honest. Among my weekly reading I always defer to the wisdom of JM:

Thanks to John Mauldin. To quote  David Bahnsen https://davidbahnsen.com  “Confusing what one WANTS to happen in POLITICS, with what WILL happen in MARKETS, is perhaps the most dangerous and avoidable mistake around. History can’t be any clearer.”


Distraction Trades- Nothing This Week.

Neither DAX nor FTSE gave any clear trade entries. When the rules say ‘do nothing’ I do nothing. Other courses of action may be available!

Something To Amuse and Delight

I like big numbers, and I cannot lie, but this cropped up via a labyrinthine route from who knows where. Thus, you have to love the internet, especially for those of us who missed full time tertiary education. So, this is fun and quirky and not sure what application it has for us, but it’s worth checking out.

Benford’s Law -distribution of numbers in large data sets


Legacy Trades 201 202

We could do no better with 201, it made the premium taken in: WIN

looked like someone had a lot of short calls!

 202 – that strangle Sell the 7000 call Sell the 6650 put (each priced at 12.5) For credit 25. WIN- See above

And you may well think this could be a ‘rinse and repeat’ strategy- well here below is data for  FTSE showing the opening price for the trade, and the biggest move. Thus, you’d have been in a pickle! In fact a friend some years ago ran the numbers for expiry week. We showed that 96% of these expiry weeks FTSE did not rise >3.6% . So the next trade I placed, FTSE went up 3.9% We will always bring you the truth here, none of that: ‘381%  or even 156% wins’ win 90% of trades. Thus hyperbole, and profiting from such is NOT the mandate here. Education is our function, and we hope to encourage, enlighten and embolden readers. Hopefully……. we don’t put people off!

2020 Expiry weeks:

Mar15 5366- 4898  Apr12  5842-5576  May10 5935-5661  Jun14 6105-6339   Jul 12 6095-6323

Aug16 6090-5948   Sep13 6032-6123   Oct11 6016-5786   Nov15 6316-6463  Dec13 6546-6484

NB Opening prices are dated Sunday of each week as day 1 of the week containing that 3rd Friday, thus prices would also be the previous Friday’s close.

Trade 203 Something From The Chain

So, let’s have some fun with this. Future= 6679 Cash= 6735

Some strategies:

Thus, assuming the market will drop further, a combination, (risk reversal) selling the 6900 call  for 63 buying the 6400 put for 57.5 Credit 5.5, risk unknown.

Next up, short call spread 6800/6750 ( 129.5-104)= Credit 25.5 max profit 25.5

And, how about a long put spread? 6450/6400 (66.5- 57.5) Debit 9  max profit 41

Big Lizard- a Variation of the Jade Lizard* Sell ATM call spread and put. So for simplicity let’s use 6650 strike. Call spread 6650/6750 (189-129.5)=59.5 plus 6650 put 118.5. Total premium 178.  Therefore, our risk to the downside at 6472 upside risk 0 as the premiums exceed the 100 point width of the spread.

*Jade Lizard https://www.tastytrade.com/learn#supplemental-terms

Thanks to Liz and Jenny and Tasty Trade.

However these are only taken, as always, to demonstrate the power, and risks of options. Views expressed here are easily ignored and wide of the mark!

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