That Was The Week
FTSE went entirely its own way as Nasdaq dropped 5% this week. Typically it has lead the rest of the market, but this idiot is of course short and biased!
So, not wishing to labour the point I will just say a word of caution as new year exuberance may have spilt over sufficiently. December was a big ‘up’ month for FTSE. Remember we were at 7059 on 30th November. Reflecting on the past 12 months it seems somewhat miraculous that some indexes(not ours obvs!) kept on hitting new highs. In a pandemic. However the US economy has been rocket fuelled compared to the UK with tech stocks, and a bit of help (QE). Stock buy backs have been a feature too.
However, returning to the focus of the site, and options, a review of 2021 showed that you could have sold any amount of OTM puts and made serious coin. In fact with the stock-in- trade strategy we employ and using Tasty Trade’s much vaunted 45 dte (days to expiry)entry, the profit was approaching 50% ROCE. So, did we stick to the knitting? Our lips are sealed. Trading once a month, and managing the trade, gets our vote. Though, for educational purposes and to maintain interest we trade weekly here. Yes it is challenging. Yes it is far more risky but probably more rewarding.
Here’s a fun item that dropped into my inbox this week. Paragraph one makes the point perfectly. Caveat- we have never blown up an account.
https://www.thetechnicaltraders.com/why-successful-traders-make-more-by-trading-less/
Note to self: Must make a trip to Canada sometime.
Distraction Trades:
DAX Sticking with the system it turned in 3 trades –2 made 100, one was stopped out for 30, missing a huge win -so maybe the stop was too tight, and another 5 is neither here nor there if we capture those 200+ moves as a result.
ADA Cardano now $1.21 Sitting on a big loss but this is a ‘buy and hope’ with fun money.
XRPUSD $.737 Having shifted to ADA it seems a little irrelevant now to look into buying this but at this price XRP would get my vote if I only held one. Cardano seems to have a better business model, I understand. As always DYOR.
Legacy Trades and 249 Ratio on the Patio!
We morphed 247 into a huge butterfly 7150/7300/7450. This is already worth 30 and it’s what we would have to pay in normal circumstances. This is a kind of cheat but we need to show how options trading is ongoing and we cannot afford to miss entire trade entries, though sometimes finding a trade every single week is a big ask.
Last week- it’s worth 36, not enough to get us interested -and remember we are playing with profits- now ugh! 20.5 after that 1%+ rise this week.
248 Jan Expiry still has some juice in it
7200 put (32.5) and 7450/7500 call spread (43-25.5) -Can you tell what it is yet? (poor taste joke!)………………. Cheeky plagiarism from Tasty Trade, it’s the Jade Lizard. Selling the put and selling the call spread- We sell the 7450 and buy the 7500. This gave us zero risk to the upside. We take in 51 and our downside risk level is 7150.
The call spread is now 30 and 15.5 for the lone put Expiry is 9 trading days away we need a nice drop below 7450.
249 Taking a View and Getting B*llsy
Feb7300 put is trading at 78 Jan 7300 put is 25.5 Guess what we’re going to do? A very spicy 3×1 We sell 3 Jan puts to buy 1 Feb
Check out the Greeks: 
While Delta and Vega are ‘running hot’ we have a big theta advantage and unless FTSE goes to the Moon our small debit (78-25.5×3) = 1.5 looks safe to the upside. While own the downside we get into trouble <7250 but we can morph into something interesting. It’s a whole new year, what could go wrong?
