272 W/e 24Jun Massive ramp(?)Put volume trades

That Was The Week Massive Buying Defied Logic

Bank stress tests, and new home sales we were told has driven the SPX up 6.71% this week.  So, discounting the frankly mind-numbing political nonsense here and in the US, markets smashed up, contrary to yet another put volume Tweet, on Wednesday: https://twitter.com/CheddarFlow/status/1539666804833927168?s=20&t=QF5lxpvdpK8rReRIFPnOWw   So, what’s to worry about? Mortgage rate hikes, inflation and resurgent covid,(up 23% says the BBC), along with a war in Europe. However we are not here to be political or proffer economic facts, much as it ‘grinds my gears’. The market is simply that and if the market is selling stocks or pineapples, there will be times when prices rise because, well just because.

The trade of the week was most definitely a long call spread on this:

What sort of person would buy into this?

My own view is of no relevance but a trader with an eye on the profits and not the fallout would have enjoyed fat returns. With a trade assisted by a legal authority who seem to have lost touch. Insider trading? Who knows? Moralists might point the finger at us FTSE traders but we are ‘morality neutral’ and can choose to donate some of our profits to worthy causes. Just keep a track of ‘gift aid’ as tax returns do ask, and I think I made a massive understatement. I hope my indolence not affect the recipients.

Annoyingly, circumstances(traffic) conspired to deny me the latest webinar”Global Risk Management with Index Options” And there’s no catch up yet https://www.cboe.com/insights/webinars

Distraction Trades:

ADA $0.5019  some increase are we heartened?

XRP $0.3696 not so sure…..

DAX  3 no entry 1 loser -30 and one win (Tuesday) 100+

It’s never a bad thing to have a side interest and there are times when they help focus on the main prize.

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.

I hate to do this but there is no way this would have been run for the whole week, given the nature of the trade. ICE.com gave us the following closing prices: Mon: 464+51.5, Tues 487+ 43.5, Wed: 441.5+47, Thurs 379.5+58.5, Friday 535.5+26.5. Remember we multiply the put by 3.

So 618.5  617.5 582.5 555 and Fri: 615 Remember we took in a credit of 658.5  so the lowest profit was 40, but we’d have taken 103.5 on Thursday.

WINNER  And while we have no idea about the optimum exit, 100 in your pocket is far from small change. £1,000 in 4 days per lot. Almost as good as Smith and Wesson but without the fear of jail time for insider trading (kidding).

Trade 272 Dealing with the Crazy

It’s been a while, but we never advocate naked trading. Partly naked, this put ratio spread despite the massive rise on Friday offers some value: We buy the 7100 put and sell 2 of the 7000 puts. This gives us a credit of 94.5 and (67.5 x2) = 40.   Now to convert this to a butterfly would require the purchase of a 6900 put -currently 49  and to offset the cost, sell a  6700 put 26.5  But this is a course open to us knowing that relationship may remain of similar price,should we need to lower our risk level. We are never binary, like the slithey tove, we can slither our way out of a losshttps://www.poetryfoundation.org/poems/42916/jabberwocky