244 W/e Nov19 Big Lizard Xmas Trade

That Was The Week – Several Down Days?

October2020 was the last time we saw 4 consecutive down days, and this was seemingly way out of character as most markets hit new highs. However our own FTSE has a way to go to hit a new high. Our trades this month were MONSTER just showing the power of options yet again. We make NO boast about our trading ability. In fact this idiot was scared into an adjustment because there seemed to be no upper limit, and being synthetically short looked like  bad idea. I will reveal all, in time.

There’s a lot to get through this week as the legacy trades have all expired now and readers may wish to make sense of the action there.

The cornucopia of emails as sometimes mentioned always has the odd gem, and this week was linked from:

https://mailchi.mp/fullertreacymoney/comment-of-the-day-9th-november-8929533?e=125ccb92ab

While that is a précis here’s the link to the whole article which, be warned, is lengthy and you may wish to scroll down some way to the relevant part. https://www.hussmanfunds.com/comment/mc211108/

Doom and gloom -that’s my breakfast! However, it makes sense of a market that seems to be at odds with reality. Covid must have had a huge effect on the real economy. The stock market is not the real economy, we know, but at some points they converge. The trick is knowing when the scalliwags are going to dump stocks. Insights welcomed here, the usual fee.

Distraction Trades

DAX …. A good trade for 100+ on Friday but the rest of the week, 2 no entries, 2 break evens -so a lot of effort for little reward

XRPUSD  Nothing to see here: $1.086 

My personal disaster: ADAUSD$1.919  

Cryptos seem to have taken a hit lately but Cordana is a longer term play. That is all I have to say on the matter.

Legacy trades and 244 New Expiry Cycle

Here’s a thing from expiry Friday :

Now that’s a lot of wonga and not including so many other intruments

 

Trade 239 Nov Expiry

Jade Lizard anyone? OK let’s go with: selling the 7300/7350 call spread and a naked 6900 put. 56.5-37= 19.5 for the call spread and 30.5 for the put. Maths PhDs will know that this equals a credit of 50. Risk of loss is therefore at 6850

Was  22.5+  (35.5-20.5)=37.5    We could have closed out and made 12.5 or £125 on about £3000 on margin= 4%(annualised that’s 200% )

So, the call spread is 55-31.5 The put is 5.5  Giving us 29 debit – remember we took in 50 We run it but would be comfortable taking 21 profit*

*How right we were- so we thought…..

Bingo! It made the full 50 WIN!

Trade240 Big Spender

Yikes! Again with this drifting moribund volatility (makes me laugh when the ‘experts’ talk about this volatile market, when they are selling something!)  Fact is: Vol is low.

We sold the Oct 7000 put and 7300 call, taking in 69, we then had to pay an extra 92.5 to buy the far month(Dec)  same strikes. Frankly, looking at a diagonal ( selling further out of the money) would be crazy money. We remain unconvinced and may come back to compare this with a diagonal. It’s all a bit pricey for us.

Was……. OCT 26+44.5   Nov 66+88.5 = 84  Not a happy trade but should we double down?

This trader found it worrying that vol is lower for the Dec put 

Guess what? It’s still 85! 2 Weeks on and it’s just losing money -trade selection needs the Greeks to line up and here they just don’t.

Last week it’s ………89  Not a fun trade but we learn

After expiry made our front month shorts worthles we now have 35.5 and 61.5 = 97.  Profit(?) 4.5 Not a loser -that’s enough said. This was too expensive- didn’t was say so?

Trade 241 Seeking Value When Vol Stinks!

Forlorn hope, it seems.  A put ratio spread. We buy the nearer the money strike and sell a number of options further out. We go with a simple 1×2 here, buying the 7100 and selling 2×6950 puts for Nov expiry. Prices 40.5 and 21(x2) Our trade gives us a tiny credit therefore of 1.5  Was 0.5 to close -so a huge win, trebling our credit- 300% …. Kidding! It’s a nothing trade. Moreover it’s not a great use of margin, as of course we have sold more puts than we bought.

Was- Zero

Now Zero! Low Vol made this a no lose– no win trade.

 

Trade 242 Pitchfork Without Rules

We try this trade which comprise usually a short call and 3 short puts at the same strike, but entry has strict criteria and this doesn’t. So the 7200 strike gives us the call 124.5 and puts 29.5×3 Should FTSE expire at 7200 we keep the whole 213 and we win if expiry is within  7412 and 6988 

Makes you think doesn’t it? Should we bet the farm on this? We’ve seen the so-called safe calendar trades do nothing but cause us anxiety, when this looks like fun.

Correction! downside risk is 7130 

OK so we tracked this during the week and it closed last Friday worth 174 that is the best price to date- good trade, and while it’s a nice win, we run to expiry for fun.

Apologies for last week’s ‘flu jab inspired error!

Expiry at 7224.5  This was a MONSTER!  213- 24.5= 188.5  WIN 

Trade243

Star Wars afficianados will understand: [Luke: I used to bullseye womp rats in my T-16 back home. They’re not much bigger than two meters.]

We try a bullseye butterfly – by which I mean we’ll set the centre at the strike of 7300. It’s an expiry ‘fly for Nov and we’re using calls. Thus we have long 7250 at 104, short x2 7300 at 64  7350 at 32.5  Giving us a debit of 8.5 and that is our risk.

We’ll keep a weather eye on it as it could make max 50 minus our 8.5 debit, but if it hit 20 we’d be happy

Best we could do was around 18.5 on thursday, and expiry got weird, so being proactive would have given our 20+  on Friday. We are just not those sort of traders -the expiry roller coaster requires nerves of steel though Friday’s action from 08:15 to 09:45 would have produced a healthy profit. WIN!

3 big wins 2 ‘break evens’  Nov expiry has been kind to these trades, and scared this idiot out of a peachy position!

Trade 244 Dec Expiry but Is Santa Languishing in Bed Nursing Ills?

So it’s December expiry and we have 4 weeks –20 trading days to exploit.

This time we try the ‘Big Lizard’ – a variation on the Jade Lizard, whereby we sell an ATM call spread and ATM put.

This gives us( 7200 strike for convenience) 7200/7300 call spread 116.5-61.5=55 and the ATM 7200 put= 98.5. So this gives us a credit of 153.5. Therefore there is no upside risk, in fact it’s peachy if the FTSE goes to the Moon. Downside……. well we have a credit so 7200- 153.5= risk at 7046.5 . Here’s where it could get ugly and require an adjustment. The thinking is that all the positives and negatives are maybe slightly tilted upwards, seeing as Xmas is coming. We need FTSE >7050 to be safe,and that level may be at risk

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.