That Was The Week Russia Says ‘ We’ve got those secrets already’
America’s madness continues while US stock markets smash up again 3% this week. Sometimes words are not enough, when the world seems to be spiralling out of control in so many ways. And yet the stock market just carries on up. Nothing to see here! We try to make sense of the market in the wider context but again this is just so out of wack. VIX has contracted in a symmetrical slope to <20 in 2 months. Last time this happened was when there was a massive cash injection by the FED in 2020. From a number of sources it seems the punchbowl has yet to be taken away. Party today pay tomorrow.
We Trade Our Beliefs
That profound aphorism was a bit of a game changer for yours truly, and probably a few others too. However we now have a period of market action that defies belief. VIX is our go-to barometer, albeit the measure of the US market’s volatility. Vix goes down when market goes up-right?
https://www.youtube.com/watch?v=aRwB1RlhWfg This guy(SpotGamma) is pretty smart and I have to confess I pay little attention to gamma as most of my trades are neutral. This video however shows we are in the Twlight Zone, and nothing’ looks or feels’ right. Sometimes ‘gut’ is also a useful barometer and having no positions is a position. While trades are for demo purposes here, many of them are taken with real money and I will confess to having no positions for September as yet. Our USP* is the weekly trade so we will continue, as they are valuable, we reckon.
* We don’t sell anything and we’re probably not unique ( which means only one in existence in the world-often misused).
Then There’s This Guy!
https://optionsgeek.com/join-top-1-club-why-option-greeks-dont-matter/
He’s not in our world and we presume he’s for real but what he is espousing is simply find a stock that is going up and buy calls. Ignore the Greeks? Make up your own mind and note the price is reduced by many thousands of dollars-would you buy a parachute on that basis?
Distraction Trades
ADA $0.5574 Crypto’s creeping courageously!
XRP $0.37938 Still lagging the rest
DAX 2 wins 100, 1 loser-30 2 no entry
Legacy Trades Trade 275, 2 wins closed and 279
For those with a limited account the iron condor having no naked element. This keeps margin limited to the width of strikes employed. Here it’s 50 and- a reminder of what the iron condor is. We sell a call spread and a put spread, our view is that the market will stay in a limited range 6875-7425
We sell the call spread, thus: sell Aug 7400 call for 49, we buy the protective Aug 7450 call for 36. Gives us 13
We sell the Aug 6900 put for 99.5 and buy the protective Aug 6850 put for 88 Gives us 11.5
We thus take in 24.5 and our risk is……. the 50 spread minus our credit= 25.5
Last week Call prices 78.5 and 53 put prices 7 and 5.5 total 27
Now 105.5, 66.5 for the calls =39, puts =0. How anyone makes money with these eludes yours truly. Of course this is with no adjustment you can always add to the positions, or shift the whole thing up.
Trade 276 We are Bullish/Bearish, or whatever
We always aim to buy and sell in combinations and this week’s offering is a call ratio spread, with a moderately bullish bias. However we don’t mind the market going south either. In fact we cannot lose unless the market hits >7600 in a big way. We buy the August 7400 call and sell two of the 7500 calls. Those prices 56.5 and 28.5(x2)=57. So you see we have a credit of 0.5 if we ignore commissions. We ignore commissions- as all our trades are for educational purposes. This trade attracts a fair chunk of margin given the risk to the upside is infinite.
Was 78.5 and 33.5 (x2) = 11.5 WIN? We will run it some more but another good return even closing out now.
Biiig reward-105.5 and 35. WIN! 76 in total. Close
Trade 277 Balancing Out An Ugly Call Trade (Is there any other kind of call trade?)
We take the opposite position to Trade 276 with a put ratio spread, but take in some premium: We buy the 7200 put and sell 2x 7100 put
Those prices: 47 and 31 (x2) gives us a credit of 15 We have risk below 7000 and 3 weeks to expiry
Was 27.5, 16.5 we took in 15 and it’s now 1 WIN! We run it again to expiry, but it’s a nice return.
Trade 278 Bonkers 3×2 Calendar Straddles
That’s a combination of words you don’t see every day! It’s fun it looks nuts but there is a rationale: We just need a big move one day this coming week. We have not seen a sensible 1% drop in ages, Vix has been quiet for a while….
So what’s all this then? We are buying 3 August straddles and selling 2 September straddles. The long and the short? Theta is mighty ugly, so we need a quick turnaround. The Aug straddle is 53 and 105= 158, we buy 3 =474. The Sep straddle 124 and 180=304 we sell 2 = 608. Now we take in 134 but that is not important. Theta = 6.5×3 against 3.7×2. It is horrible so…..
Just for fun let’s do 3×3 at great expense 304×3= 912 158×3=474. Our cost 438-ouch! It’s not anything we’d do but let’s see what transpires.
NOW I remember why we don’t do this! It needs that massive move,preferably to the downside, so how grim is it? Well the numbers are truly horrific: 95.5×3 =286.5 and 147,113=260×2=520 LOSER! Sometimes we need to show the ugly side and we did say it’s not anything we’d do, for so many reasons. It is trying to be predictive, and primarily we avoid doing that .
279 Can we find a credible calendar trade?
Well typically we’d look to sell near month and buy the following month- what’s there?
Well…Sept 7600 68 Aug 7550 14.5 Yes! CALLS And this may well be a disaster -we will sell 2x the Aug calls 14.5×2=29 and buy 1 Sept call for 68. We pay therefore 39 for this ugly looking creature. Logic of the trade? 2 things- theta and the possibility of adjustment in the Sept series if it goes against us. We may need to make that adjustment midweek- we’ll aim to keep up.
For clarity the strikes are 7600 in Sept and 7550 in Aug series.
