256 W/e 25Feb Options in Unhappy Times

That Was The Week- So Sorry for Ukraine

It seems somewhat churlish to mention events in Ukraine here so we’ll stick with what we do- options trading, with our best hopes for that poor benighted nation.

It is impossible to know what will happen this week, so we will simply look at some things that popped up this week.                From CME: A couple of weeks ago CME Group’s FedWatch tool was pricing in over a 90% chance of a 50 basis point hike at the March FOMC meeting.  That has now fallen to 21% with a 79% chance of a 25 basis point hike.

More sad news:

Dr. Van K. Tharp passed away from liver failure on Thursday, February 24, 2022, in Raleigh, North Carolina. His wife of nearly 30 years, Kala Tharp, was at his side. She has lovingly cared for Van during his illness which was first diagnosed in June of 2021.

Dr. Tharp will be remembered for being among the world’s top trading coaches. He is a founding father of the trading psychology field. Van was also a trading concept innovator, a brilliant teacher, and a humble leader. He had a keen, creative mind and a singular ability to be authentic in each moment.

His one statement helped me enormously and it is this ‘We trade our beliefs about the market‘ and that is such a powerful statement.

Back To The Matter In Hand

It gives me no pleasure as I have in the past, been at variance with this trader:

Well here is a ‘curate’s egg of a trade and plain evidence that you don’t buy when vol is high-but if you must, then make sure you use a spread. Buyingor selling naked may come back to bite you. A nod to Larry McMillan who says he buys naked as in his experience it has worked well. The Greeks would have made it plain that sensitivity to volatility(Vega) would not have been favourable.

We have all seen puts go from 10 to 100 in double quick time. This week we were, however, already in a high vol environment so with Thursday’s vertiginous drop we saw March 6500 puts go from 21 to 51. Good but not a monster trade.

We also saw this on Friday’s vomit inducing buy in

This is a Russian company traded on FTSE– can you believe this? Oligarch wallets went into overdrive as enormous amounts of cash entered the market. Allegedly. Just sayin’ if you wanted to get cash into an asset that might be immune from seizure as it’s not in a dodgy bank, you might do this. You might.


Distraction Trades

ADA Cardano now $0.8955  –cheap or a money pit?

XRPUSD $0.703    Not sure what to say but this was my old buy price.

DAX- woeful- one break even and 4 no entries.

Legacy Trade 255, and 256 -Sometimes You make more by Sitting on Your Hands

255 After 4 big wins, what’s to do? GUTS that’s what!

Remember I mentioned being ITM is not as scary as you think? Well I DID say that! Time and again I have been in that position due to rubbish trading. And yet, here we are every month coming up with the goods. As I also said I was hoping to place this trade  intra day with dynamic prices but the power grid denied me.

This trade is called a GUTS -sounds like stepping up to face the Jabberwocky, ballsy and fearless, but is it?

A GUTS is an in the money strangle- so you will always be closing for the minimum debit. Here we are 100 points ITM either side, so this trade can never be cheaper than 200 to close (in theory, I’ve yet to test that). We sell the following March options:

7400 call 197    7600 put 220.5= 417.5 credit 

Currently 208.5 and  242 = 450.5 This is due to increased vol and we hold steady for now -we might have looked to close out for a small profit but who knows what’s in store.

256 Same again

In such uncertain times we would prefer to stay on the sidelines, but if push comes to shove -we repeat 255 with that juicer premium. 450.5

1 Comment

  1. sidelines proved to be best as this would have beeen closed out for 444 on Tuesday but more likely  an ugly loss of 200 today- Friday with the FTSE at 7168 

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