260 W/e25 mar Limited Risk Butterfly

That Was The Week The Fear Slunk Away…. Again

Inflation seemed to have renewed vigour and the chancellor can do nothing effective, given our massive debt. However fighting inflation has never been without misery but you can’t tell that to the stock market. So that still leaves us very wary of downside risk. Of course FTSE is comprised of many global companies, it just got harder to gauge risk and there can be no clues with exogenous events.Investors and market participants seem unfazed, and I assume they are wiser than me. I wonder if my assumptions have merit! 

We see VIX back in the ‘not sure’ region. We see a surfeit of 5  with the up day(32) /down day(27) count, nothing to see here. And, last week we started looking at : Skew:11 Mar 1.49  18 Mar 1.54  Now , 25 Mar 1.51 (Puts just got relatively [relatively] cheaper compared to last week)

Price Headley in his wisdom as oft quoted here says ‘sometimes you make more money sitting on your hands’.  We, however have to produce a trade every week. Do I hear violins?


We Get Algebraic

For those among us who enjoy the complexities of options, the master Nicholas Nassim Taleb gives us a rather ropey presentation with old school chalk and blackboard. DON’T slouch at the back! PAY ATTENTION- You’ll need to with the poor audio.


The mathematicians among you may know,  explaining the historical formula  https://www.isaquepimentel.com/post/finance/basics/bachelier-formula/

And to put some plant based protein on the bones:

How are forward contracts calculated?

Distraction Trades

DAX 3 days no trades, one break even and one +60. However we missed a couple of huge moves.

ADA Cardano $1.1249 We have seen some upside and this idiot bought some more, for no good reason!

XRPUSD $0.8256 So, no moves there and this jury is still out with all crypto

Weekly And Legacy Trades

259 Where did the Fear Go?

We chose something moderately conservative(with a small c)

6825 put 36   7600/7650 callspread 50.5 and 36 =14.5,plus 36=50.5 CREDIT

So, what is it you ask? Zero upside risk and downside risk at 6775? correct, it’s a……… Jade Lizard

Now 19  for the put and 18 for the call spread

260 A Somewhat Saggy Bottom in Sight?

Let’s say we see the next few weeks of calm heads prevailing, but optimism sagging. We look at a wide call butterfly, with huge risk/reward. These are a pain as they rarley do anything fun en route to expiry but our risk is limited to the debit

We are buying the 7300 call (243) selling 2x 7450 calls (134 x2) 268 and buy the upper 7600 wing (54.5). We thus have a debit of 29.5 Keen eyed followers will note the max profit is 150- 29.5=120.5 or 400% (We can do without the hyperbole, we’d take 100% )