That Was The Week Dollar Soared, Pound Tanked, FTSE Tanked All Our Trades Won, Again
Phew! A chance to pause and reflect on a tumultuous week. Firsly we hope nobody suffered big losses. Schadenfreude is no admirable position and to see retail traders having a tough time is not nice. However, smart options traders, even dumb options traders like yours truly, find a way to get back on the road to profits. Although most of us have a chunk of change from our trading, as a cushion.
Rho has popped up and for those who have forgotten it is: an option’s sensitivity to interest rate changes. Yours truly had forgotten what these were like. However interest rates only affect us when we have cost of carry, the loss of interest while capital is tied up. Inflation at 11% makes this something of a non-entity. A quick Google search shows there is no metric or ‘Greek’ for inflation, though one article reckoned options prices were pointing to higher inflation in 2021. Ours is a world of smarts!
Why We Trade- It Really Is Simple
Does the chart tell us how hopeless they are ? Some may be underperforming substantially, but this ridiculous position of buy and hope is just over. Your own nitwit trader had a call from the ISA provider. I felt it was important to explain to them that I expected a professional money manager, to, er…manage. No, I was told, they do not hedge with options. What kind of professional does that? MOST OF THEM! So, gentle readers, this is why we trade. We are poorly served by (in my opinion) lazy inept ‘professionals’. Of course the flipside is -just buy the SPX. No fees and it is rarely beaten by the ‘pro’s’.
Distraction Trades and Crypto Misery
DAX 2 losses (the stop is 30) 2 No trades and 1 win 200.
ADA Cardano $0.4734
Legay Trade- All Winners and Trade 271
267 We Went Assymetric
So instead of doing a simple put ratio buying one selling 2, (OK sometimes we sell 3!) We buy 2(two) and sell 3(three).
Hopefully you will see the prices make this a tiny credit trade 88.5×2 -61×3= 6. Our real point of interest is how the Greeks stack up,and this could do very well if the market carries on down. Bear in mind that to date the S&P500 is down 18.66% Nasdaq down 28.28% FTSE is flat, but since when were we immune from the US? Hence this trade to capture a gentle down market in the next few weeks. Zero upside risk, downside 6900 …. But with many possible adjustments
Prices now 24 and 15.5 so.. 48 and 46.5 We can afford to sit on this it’s a freebie-tiny credit, so it’s only costing us a modest amount of margin.
This week: 23×2 and 14.5×3 -so 46 against 43.5 Nothing to see here!
Now….. 7150 = 58 x2=116 7000 =34×3=102 We could close out for tiny credit 14, but let’s see what more we can get. Fear and greed combining!
YIKES! Hanging on to expiry 7108 Nice win(42) but could have copped a little more riding the PIN risk
268 – Closed last week, remember -it’s not an expiry play, as we are long the near month.WIN!
269 Making sense of a short week the Number 3 crops up again, we have a theme!
So due to the Jubilee we have to use Wednesday’s prices and again we are going for the racy calendar ratio –sell 3 x near month puts buy one next month put. We choose the 7200 strike
Yikes! We were in the doodie! We own the July 7200 put now 146, we sold 3x 7200 Jun puts now 69.5×3=208.5
Remember we are not really in trouble, as volatility smashed up, but we only have 4.2 trading days. We will run this to expiry and look to adjust if we incur losses.
Possible adjustments – we sell 2xJuly 7000 puts and buy 1 x July 6850 put -giving us a wide butterfly and a ‘war chest’ of 120 to finance ‘rolling down’ the short puts.
LOSER!!!! Own up- this is a losing trade….oh wait. Expiry was 7108 making those short puts 92×3=276. And our long July put? 290.5 WIN!!!!
270 -Can We Squeeze The Last Bit of Juice?
Two words : Ratio diagonal. Two other words: strangle, calendar.
We are selling 2xJun options and buying 1x July options
2×6800 jun puts, 2x 7550 jun calls 15.5 and 17 respectively. Multiply by 2 gives us 65
Thus,we are buying 1xJuly options
6700 put 53.5 and 7600 call 56.5 gives us a cost of 110. Our credit for selling those Jun options is 65, so the whole thing costs us 45.
We want FTSE above 6800 and below 7550. That is all.
Bored yet? WIN!!!! Our short June options all went out for zero leaving us with 6.5 for the call, but the put….92.5 So 99-45=54
I am totally mystified as to why serious people would trade anything else.
Trade 271 New Expiry Month
Bright shiny new expiry chain- sets the heart aflutter! So, what can we have fun with? Safe, predictable? Well sort of, we are going with one of the ‘crazy trades’. The Pitchfork. We need high volatility, we need a straddle >300 and in our case we look at the 7000 strike, which gives us 358.5. Subtract that from 7000 gives us 6641.5 Now factor in a bit of wiggle room and I like the 6700 strike(there’s no 6641.5 strike!) and here’s where we get the pitchfork -we sell 3 puts and 1 call at that level. So, this gives us 381 and 92.5 = 658.5. Bear in mind this is what we have taken in as credit. Here’s the Greeks(not accounting for inflation!) However, please remember to multiply the put Greeks x3.
Also bear in mind we have the market’s money in our pocket and the aim is to keep some, most, or all of it! Just imagine those hopeless ‘fund managers’ with fat salaries unable to get anywhere near the kind of performance we can show.