That Was The Week – A Rise of 2.28%
So, we note the 6000 level seems to be a magnet as might be expected for no particular reason. Non- Farm payrolls had no effect on FTSE but the US indices S&P 500 almost making new high, Nasdaq at new highs. Same theme- FAANGs and a complete disconnect with the economy. However we have seen worse distortions as in 1999 but that was not in an era of negative interest rates and QE∞ and beyond. Though the ‘old guard’ instrument of hedging has seen gold at new ATH but my preferred metal- Silver has doubled since the March low.
Above –FTSE seems to have smashed up in terms of over valuation. Curiously leaving S&P500 looking fair value!
Thanks to Incrediblecharts.com -what is the take away here? I highly recommend: https://www.mauldineconomics.com/frontlinethoughts/yellow-flag-jobs-data
The esteemed John Mauldin always finds interesting and challenging sources of data. Quite how we can be optimistic is a bit of a mystery. Vital to be optimistic in life, but in finance it’s probably the worst position. Thus banks are being parsimonious with lending now.
Perma Bear Finds Neutrality in DAX
So, the ongoing challenge of finding a way to trade directionally is going ok with DAX. Entries are ok, but exits and stops are yet to be configured. Case in point- Friday. Guessing a direction on the first Friday of the month is folly. The only clear trade entry came at 13:10 somewhat premature for non-farms but it worked out as a move of 100 points to the upside. Cynical trader that I am, it seems that discretion is the key. This system of entry cannot be automated as the morning session would have produced several false starts.However with a trailing stop these would have been profitable. Problem being quantifying the stop. Maybe selling puts is still the ‘go to’ trade for most people.
Those Legacy Trades- A mixed Bag and That Ratio Thing was Horrible Again- My Fault
Last week 5550 Put 37 and 6100 Call 35 total 72 On Monday about 71 B/even -this trade is closed on the Monday
This week -we use Sept prices now 6200 Call 63 and 5650 put 65.5= 128.5
Trade 180 A Revisit to a Curious Trade
Based on Futures price(cash expired at 6262 this week)
Our calendar(time spread) selling near month 6000 put, buying far month 6000, but…….selling a very far OTM 5500 put. Our cost is zero(margin req’d) and theta is onside bigly. Prices (short 106 and 66) 171.5 = -0.5 Unchanged.
Last week 177.5 (Aug) Sept 239.5 and 82, so a loss of 20, Now swung back to 22 credit
Trade 181 Far OTM
So, another theta play with a put ratio spread and zero cost. Selling 2×5550 put 59.5 and buying 5800put 31. Credit 2.5(Margin req’d) Logic of the trade? We are safe down to 5300 . Zero risk to the upside and if we go nowhere we might close out for a decent credit. >10 would be fine. Winner! Credit 14 Hit 23 on Monday. We run it some more….
Trade 182 Trading the Noise
3:2 ratio straddle. We BUY near month straddles x3 and sell far month x2. 5900 straddle gives us the following Aug prices: (115.5+125.5) x3= 723 Sept( 179 +192.5)x2= 743 Thus, we have to pay up, a debit of 20 now 48, loss of 28 Loser!
Quelle dommage ! Oh, me miserum! Yes- big disappointment. I have to confess to giving this little consideration, but hope it provokes some thoughts about various strategies outside the box.Volatility is key and therein lies the problem.
Trade 183 It’s Getting Hard To Find Something Good
Check out the theta! 2.8637, but should we be tempted? The trade: buy one 6000 put, sell 2×5850 puts for Aug expiry. Cost is 94-(46×2)=2 . Remember the Greeks need to be doubled,so we are 2x-.26 deltas minus .46 delta. Makes us slightly bullish at minus 0.06 delta. You do the math. Afficionados will know where the risk is too.