251 W/e 21Jan Options win, stocks lose.

big rise in VIX, FTSE follows SPX rather weakly

That Was The Week We Saw Red.

Ouch! So S&P got a brutal wake up,(Drop 5.18%) while our little FTSE toddled along like a bemused puppy. Of course the consituents of the indexes are quite different as tech stocks dominate the US. FTSE may have double topped for now but the future is fraught with issues, countering the apparent resilience of the economy. Inflation- it’s transitory they said, but it’s only transitory if the market can exercise discretion. We have little discretion when buying utilities, council tax(just try and get re-banding!)etc. I imagine booze and fags will take a hit with more tax hikes. Tobacco, while harmful may be little worse than living next to the M25 and now vaping is coming into sharp focus. Thankfully I left my nicotine addiction in the last century. However I don’t mind indulgences being punished, I’m a moderate these days!

Back to the knitting, a couple of interesting links and another take on our market view. At what point do we say “enough data?”


And here, pertinent to our own little market:


As options traders we know volatility (transitory or otherwise!) is key to our trading. We can form valued, informed views in order to drill down to find the trade that fits our risk profile, and our anticipated reward. I was informed of the many billions of (ill informed) ITM calls in SPX on Monday-and look what the market did to those! Yes, I dislike naked long calls and naked short puts. However we cannot know the rationale behind those positions – maybe the trades were placed as ITM short calls

When is information power? When it is helpful. Knowing there is a lot of open interest with certain options/strikes/ series means nothing in isolation. Volatility however is our most powerful tool.

Distraction Trades

DAX 1 loss 1 break even, 2 no trades and one big short win on Friday 200+

ADAUSD -Cardano now $1.46 

XRPUSD $0.567

Crypto’s are getting their butts kicked right now but Tasty Trade’s Tom Sosnoff is also a fan of ADA, and he’s buying more, as he calls it dollar cost averaging.

Legacy Trades and 251

We morphed 247 into a huge butterfly  7150/7300/7450.  This was 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.

UGH- now worth 11.5 but it’s a freebie remember- a big drop required.

Haha! Run at your peril, rule of thumb- take 40% of possible max reward. It’s not a loser, but a salutory lesson in taking profits. What’s that phrase again? Oh yes EXIT is e v e r y t h i n g

248 Jan Expiry still had some juice in it-and how!

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 was 30 and 15.5 for the lone put  Expiry is 9 trading days away we need a nice drop below 7450.

Now still around 45  -run it as it cannot lose to the upside?

Did nothing, but not a loser. You could argue that it cost margin which could have attracted 0.35% p.a. in the bank.

Expiry was well above 7500

249 Taking a View and Getting B*llsy

Feb7300 put was 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  now 7 and 58– run it to expiry but it’s done very well  WIN!

Look at 247 -we hung on for more, but here that worked really well as the 7300 put is now 74(-1.5) 72.5  WIN!

250 Return of the Weekend Strangler 

It’s been a while since we tested this but why not? A strangle is of course a short call and a short put, with the aim of the trade being to keep away from the underlying. This was using the Jan expiry- ie one week to come good.

7600 call  20.5  7450 put 21.5  We took in 42  credit  with time decay working for us, we hope the index does not hit 7643 or 7407 it’s a cheeky little ‘in and out’ trade- we need to be nimble if it gets ugly.

BIG FAT WIN!  Perfect outcome we collect the full fat premium 42.

251 A new Expiry cycle

So, let’s trade with the market’s money and use the  Feb 7300 put that we own. Simple choice- the market may take a tumble on Monday based on the futures close, so we could wait, but lets do a put ratio spread at 7500(long) 7400 shortx2 

Thus we  now have the following prices: 137 and 100.5×2. We are now the proud owners of a butterfly. We are bulletproof. Our credit on this trade is 64. We could have sold the 7300 put for 74.(We still bank 64 and buy a pizza!) However this way we could make another 100