Discussion Forum


  • From Terrapin Trader on Trade 15 Clueless, But Cynical

    Stockcharts is a great resource and J Murphy wrote the book on TA. It is worth taking some time to look at technical analysis, or charting- it may not be for you,but you may find your niche. Either way there are people who make serious money from charts, and in trading we need to find our own way, often ruling out that which doesn’t suit.
    The trade this week is a bit boring but in my defence I am still unwell,and cannot honestly see ‘what the heck is going on until our people figure this out’. To quote!
    In the past I believe the charts will show that twice a year the market dips by 4-6%. You may wish to construct a strategy around this sortof thing- I have not done it but I know there are times when put prices go to the Moon. You can multiply your money buying put strategies in times of market peaks and low volatility. I’m not a great trader but I’d bet there are many who sit on the sidelines until conditions line up for a big fat drop.

    2017/01/29 at 1:08 pm
  • From Terrapin Trader on Trade 14- Buying Cheap or is that for the Birds?

    I am short FTSE I have vested interest in seeing it plummet up to 10%! 1% would be peachy,though.

    FTSE sweetly obliged- I closed out for a nice profit

    2017/01/26 at 11:14 am
  • From Terrapin Trader on Long and Wrong,Short and Caught

    When I state my views they are highly cynical- I don’t believe anyone knows what goes on beyond their own microcosm. I have met economists who have no idea about simple money transactions, airline pilots who got lost in the supermarket and musicians who could not count beyond 4. I’m far from the sharpest knife in the drawer, but I do have a track record of sorts. We have not seen volatility like the early noughties and everything I have read tells me VIX https://www.bloomberg.com/quote/VIX:IND is mean reverting.
    We may even see a triple digit spike. Put sellers are not getting bang for buck-I’m super cautious in my own put positions, but confess to being short and caught with a call position,which will need some astute adjustments.

    2017/01/12 at 12:54 pm
  • From Terrapin Trader on Trade13 It's Getting Hard to See any kind of Sense

    We could of course trade the March,April expiry or even further out-but markets get thin and prices get a bit crazy-quite naturally. It’s be interesting to compare this trade with say buying 400 shares BP at 515 after it’s had an incredible run. Just for fun.

    2017/01/08 at 12:31 pm
    • From Terrapin Trader on Trade13 It's Getting Hard to See any kind of Sense

      BP now 486 -shares-who’d be crazy enough to get involved with that nonsense?

      2017/01/29 at 4:26 pm
  • From Terrapin Trader on To Train or Not To Train

    Yes I got burned trading stocks based on the ‘fundamentals’ it’s an industry that serves only the fund managers-yet still they cock things up. Almost £400 billion in QE-we don’t even know the real figure-this really gets me angry. Banks, like politicians, are there to serve, not to dictate. The economy has never been so skewed, and like an athlete on banned substances, performance looks great, until it gets found out. That is simply my opinion- maybe things are going great- car sales are up, but so is household debt.

    2017/01/05 at 1:45 pm
  • From Terrapin Trader on Trade 12- Legging In

    Hope it’s clear that while you can enter a whole position, you can ‘leg in’ to any number of option strategies, in any order. No other trading vehicle gives you that flexibility,and almost limitless choices. You can vary the strikes, the expiry, the amounts and continually morph/adjust whenever you want.You can mix puts and calls in ‘iron’ strategies.You can trade volatility,time decay,direction. You can limit losses/gains,close out partially, it’s all about your own mindset.

    Everything else is frankly one-dimensional-you’re in the trade you win or lose.

    2016/12/31 at 1:30 pm
  • From Terrapin Trader on Year End Euphoria

    Among the hardest things to do, is to get rid of prejudices which have a basis in real life misery. My early full time trading was profitable but I was constantly playing catch up from 2003-2005 as the market rise was relentless. This was built on the bogus economics of Dubya Bush and the rampant money printing( helicopter Ben anyone?) It took a long time for this idiocy to filter through to reality,but by 2008 it became apparent that trying to make a 20 mph economy run at 50 mph was not going to have a good outcome. This is STILL not resolved. The debt mountain increases,and only due to low (negative) interest rates do we still have working economies.It’s a global staring contest with debt and we remain cautious as to who will blink first among the prime candidates China, Ems, most of the minor European countries.Markets climb a wall of worry and we trade the market NOT someone else’s economy.

    2016/12/31 at 10:35 am
  • From Terrapin Trader on Trade11 Update

    latest prices for the straddle- 147.50 for the call and 39.50 for the put=187, so as our second tranche was closed out leaving a buy price of 166, this is a good profit of 21 (21/166=12.6%) All in a day. Super low risk and nice little turn around even if we’d stuck with the original buy price at 181.5. This is NOT the ‘swing for the fences’ trade-we don’t do that, and the only way that can happen is by buying very cheap puts before a market crash. Yes there are 10,000% opportunities.

    2016/12/30 at 1:45 pm
    • From Terrapin Trader on Trade11 Update

      Today 221.5-patience is a virtue and it looks like I missed the peak at >7200 which probably meant about 230

      2017/01/03 at 9:36 pm
  • From Terrapin Trader on Grim Reading -or Sage Advice

    *To date trade 11 is a very very modest winner-see update

    2016/12/28 at 8:46 pm
  • From Terrapin Trader on Trade11 Update

    The trade is into profit at 180 now- of course we could close out half the trade, but we had the chance to buy at 164 which was lucky. This has 3 weeks to go though….

    2016/12/28 at 1:43 pm
  • From Terrapin Trader on Grim Reading -or Sage Advice

    I’d say a ‘failed trade’ in our world is a situation where insufficient analysis had been done. The ‘what ifs’ had not been addressed-like selling naked,it’s uncontrollable, unless you have a rock solid plan- ie close out or adjust when premium goes against you by n%. Letting bad trades run is a twofold killer- it runs you over then comes back to run you over in reverse, by depriving you of the next opportunity. That’s for another post

    2016/12/28 at 12:58 pm
  • From Terrapin Trader on Trade 11 This may be a Slow Burner

    So, at close of trading the trade was worth 164.We paid 181.5. So a loss to date of 17.5. We can either take on more risk and buy,averaging in, or wait. I fancy doubling up,just sayin’…..

    2016/12/23 at 1:35 pm
  • From Terrapin Trader on Personal Trading, Could I do Better?

    Holding to expiry is a lottery-and when you are short( you have sold options) you have what is klnown as PIN risk- ie the underlying is ‘pinned’ to you. If you had sold some puts in BP, you might have BP stock ‘pinned’ to you.A short call in BP would mean selling the stock. In other words you are forced to buy/sell those shares. Most options expire OTM (out of the money), so they are worthless. The trick is knowing which ones to sell and which ones to buy! That is why you have to grow into trading,you need to develop a trader’s mind.

    2016/12/15 at 5:34 pm
  • From Terrapin Trader on Options Volatility and Market Direction

    There is a history of smug traders who just sold puts, considering them overpriced-but I have seen puts go from 3 to 300 in a few days, when the market got too smart and vol spiked up massively. I think this happens at least twice each year, barring the years I was selling calls! 2003-2005- as usual DYOR. Good options trading is about limiting risk,and not paying over the odds. Happy trading

    2016/12/14 at 12:59 pm
  • From Terrapin Trader on Trade 10 A Cynical approach

    In a normal world I would not be selling anything with volatility at 14%, so please take this with a large pinch of salt. I have a number of December positions and have yet to take January trades,and trade 10 would not be on my list

    2016/12/10 at 4:06 pm
  • From Terrapin Trader on Look out Below!!!!!! Shiller Alert

    Pretty sure the dumb money is trying to get that dinosaur the DOW to hit 20,000 by end of year-does it affect the UK ?

    2016/12/09 at 4:16 pm
  • From Terrapin Trader on Look out Below!!!!!! Shiller Alert

    Just my take on things- I’m not a good trader,and constantly overlook these sort of things,but today I had time to check Twitter and the chart just looked very worrying for me. The Santa rally/Trump pump is it for real? No way would I be going long-that’s just me,cynical and cautious.

    2016/12/09 at 4:02 pm
  • From Terrapin Trader on Our 'Mission Statement'

    If anyone would like to be a part of the ‘ground zero’ group, you need to let us know.
    There is of course no financial commitment but there is a moral one. We do not want half hearted wannabes who expect to be spoonfed. This is for people who will take responsibility for their own actions but of course will be able to get support from the group if they want an opinion.

    2016/12/09 at 2:48 pm
    • From Nigel Todd on Our 'Mission Statement'

      I have successfully traded options for some time,mainly by way of
      cash covered written puts. I am always amazed at the lack of
      knowledge and enthusiasm for options in the UK. The opportunity
      to contact other traders would very welcome. I reside in west
      London, so shouldn’t be too far from your home base.

      I look forward to hearing from you.

      2016/12/18 at 12:57 pm
      • From Terrapin Trader on Our 'Mission Statement'

        perhaps we should keep it a secret-we’ve done the hard yards! Welcome aboard

        2016/12/18 at 3:17 pm
  • From Terrapin Trader on Where Did Common Sense Just Go?

    The above is a personal view on how we can trade options given these conditions- I hate these rising markets when the darker side of me believes Armaqgeddon is only a heartbeat away! Others may be less gloomy. It makes me laugh when the clowns in the media say it has been a good day for the markets when they rise. It’s only good if you’ve sold the stock you bought much lower.Better to rejoice when the market has dropped 50% because you will,as in 2009, most likely make money. The worst investors buy at the top…………………the professionals.Kidding!!!!

    2016/12/07 at 12:12 pm
  • From Terrapin Trader on Trade 9- a Quick Update

    fortuitous close out again- the trade is currently 246 to close-not so much fun.

    2016/12/07 at 10:40 am
  • From David Eppel on Trade of the Week 9 -It's all about the Numbers

    update 226 to close out -that’s a 19% return-actually it’s not as margin required might be more than the 280 taken in.However it’s £540 profit on a one lot- in 2 days. Annualise that Mr. Fund Manager!

    2016/12/06 at 10:51 am
  • From David Eppel on Trade of the Week 9 -It's all about the Numbers

    Just noticed this is now tarding at 250 to close- 10.7% profit! I am seriously not doing this to wind people up, honestly.

    2016/12/05 at 1:09 pm
    • From David Eppel on Trade of the Week 9 -It's all about the Numbers

      I would look to take 25% within a week, I have to say

      2016/12/05 at 1:10 pm
  • From Hywel on Trade of the Week 9 -It's all about the Numbers

    Hi Terrapin, as you say not a great trade because volatility is relatively low and as I type with the market up, volatility has come down to 14.4%. The 6775 straddle is only collecting 253 in premium at the moment.

    On Straddles in general what’s your profit target? 25% / 50% / hold to expiration?

    2016/12/05 at 10:13 am
  • From Terrapin Trader on Trade of the Week 9 -It's all about the Numbers

    with volatility neither high nor low it’s not a nice trade- so let’s see where the market takes us-if it’s a quiet week this may make money but typically I’d be looking to get well over 300 in premiums this far from expiry. This trade has a modest safety net ±4% -you may wish to check a site like Yahoo for the monthly stats the swings can be up or down 10% but settling somewhere in the middle. As always do your own research-it’s fun and it gives you confidence in your own approach

    2016/12/03 at 2:25 pm
  • From Terrapin Trader on Trade 8 - an Update, Almost Doubled our Money

    Those are real prices from a free data vendor, I just take screenshots but there is no reason to doubt their veracity. I make no apologies for being such an amateur number cruncher or accountant. You don’t need a Nobel prize in maths- Fisher Black, Myron Scholes and Robert C. Merton did that for us. I thank them every day!
    By the way I’d have scaled up all the trades so in real terms your outlay might be £1,000-but consider that it is highly unlikely a butterfly will go to zero in the 2-3 weeks before expiry. I’m the plank that let’s them run to zero in expiry week! I’m the clown who buys shares that tank the day after I bough them- but never again. Learn from my schoolboy errors.Please!

    2016/12/01 at 5:50 pm
  • From Terrapin Trader on Trade of the Week 8- it's time to get with a Strategy

    You may wish to look at the work of Charles Cottle-the butterfly guru and all round nice guy who gives away much of his excellent work.

    2016/11/27 at 12:48 pm
  • From Chris on Trade of the Week 8- it's time to get with a Strategy

    Loving the content. So are butterfly mainly for when you’re not sure which direction a stock is going in, but you know a big move is about to be made?

    2016/11/26 at 5:43 pm
    • From Ralph Windsor on Trade of the Week 8- it's time to get with a Strategy

      Chris, it’s usually the opposite for a butterfly, the maximum payout is when the stock/underlying remains around the strike price of the two short legs. I tend to regard butterflies as covered short straddles (and vastly prefer them to that trade as a result)

      You can use them directionally (which I think is what David has done in this example) where the body (2 x short positions) is above or below the money, depending on whether you’re bullish or bearish. If I’ve read the numbers properly, David’s butterfly is currently bearish as the short strikes are at 6700 and the FTSE is around 6800.

      The main snag with this strategy from a directional perspective is that you’ve got to be fairly precise about the price destination on (or near) expiry, that’s what gives it the higher risk/reward. You can adjust by adding more spreads at different strikes, but they usually reduce the profit potential too. Adjusted butterflies tend to start looking like condors after a while.

      I’ve written an article about butterflies here which has a few links/videos etc also: http://options.marketglossary.com/butterfly-spread

      There is a basic butterfly template they’ve provided on options creator that you can play around with: http://optioncreator.com/long-butterfly

      The Charles Cottle book that David recommends is a good one, but it’s not exactly an easy text for beginners. The Gavin McMaster title is an easier intro to butterflies (and it’s about two quid on Amazon): https://www.amazon.co.uk/BULLSH-FREE-GUIDE-BUTTERFLY-SPREADS-ebook/dp/B00FGYTA42 The Dan Sheridan videos on YouTube about butterflies are worth watching too and cover a lot of these kinds of trades.

      2016/11/30 at 10:51 am
      • From David Eppel on Trade of the Week 8- it's time to get with a Strategy

        good spot Ralph- I like the ‘targetted’ butterfly as a big win/low cost trade with zero risk of ruin. I have no more clue on the market than anyone else bu if there’s any weakness in the next 2 weeks we could see a good return. I’m hoping to ease people into the options mindset,and Cottle is a bit of a stretch even for us seasoned campaigners. I have been checking out some equity options but I just find them too awful as there are too many variables for my liking-keep a weather eye on here,though as I think it’s anarea of interets to those who own shares.

        2016/11/30 at 6:08 pm
        • From Ralph Windsor on Trade of the Week 8- it's time to get with a Strategy

          The targeted butterfly is not a bad idea. I like the risk/reward, it’s one of these strategies you could pay for with some spare change from a higher probability setup and not worry about it too much if it doesn’t work out.

          On the market conditions, everyone always seems to go on about the Santa rally at this time of year, but in 2014 & 2015, it was pretty late showing up. In early December you seem to get more like the ‘Christmas Party Hangover’ effect instead and the market drops off – sometimes quite a bit. So I reckon your trade idea might be worth a punt and it could work with more or less any major index underlying.

          There’s an interesting article about December performance for the FTSE here: http://stockmarketalmanac.co.uk/2016/12/the-stock-market-in-december-4/

          2016/12/01 at 4:44 pm
    • From Terrapin Trader on Trade of the Week 8- it's time to get with a Strategy

      a butterfly makes money when the highest price option is ‘in the money’ at expiry while the ‘body’- in our case the 6700 puts are just out of the money. It is zero risk from the amount you pay, as it is long(bought) spread 6800/6700 and a short (sold)spread 6700/6600 which cancel each other out, so you want the range of the underlying FTSE to hover around the 6700(the body) area.(You can target a ‘price range’ cheaply in other words). At expiry if FTSE=6700, the 6800 put that we own is worth 100, the 6700s are worth zero, and the 6600-which we only bought for insurance, is also worthless. So we just want the FTSE in the 6800-6700 zone. Does that make it clearer? You do not have to have much of a clue to make money in reality-unlike other trading. With options you can be wrong about direction but make money-so if FTSE is below 6800 at expiry we make money. Exit is the problem-to be discussed at a later stage. If you’d like a more personalised reply, let me know. This is about concepts-think of it in the same way as Sudoku.

      2016/11/27 at 12:45 pm
  • From Terrapin Trader on Trade of the Week 8- it's time to get with a Strategy

    We will discuss exits( or closing trades) soon but getting heads around concepts is what we need to achieve firstly. It is hoped that our trades are being scrutinised and I make no apologies for being opportunist at closing out ‘paper trades’. It’s just not possible to tailor trades according to other people’s personalities. I’ve met all kinds of traders and I am certain everyone has a different risk profile-it would be fun to get you guys to post how you would have traded these. It is also not possible to show all the variants,though maybe we can do this at some point. I will laugh if trade 8 goes all the way, so please don’t think I’m in any way a guru. I’m just a passionate trader who sees opportunities in option prices.

    2016/11/26 at 12:41 pm
  • From Terrapin Trader on Trade 7 A nice Little Earner

    The Butterfly- options are visual as well as mathematical- and we will get into some of the more exotic strategies, but the butterfly -think of selling the body and buying the wings.
    The risk graphs for these strategies along with the strikes are highly suggestive of the names. It will become so second nature you’ll start to construct options trades with random numbers-it’ll get weird I promise!

    2016/11/22 at 11:24 pm
  • From Terrapin Trader on Using The CBOE Calculator-It's a Bit Clunky But Worth It

    Thanks Richard- I’m just a regular bloke with 3 ‘O’ levels and no background in finance or accounting,but I’m still a reasonable guitar player!

    2016/11/21 at 12:07 pm
  • From Richard on Using The CBOE Calculator-It's a Bit Clunky But Worth It

    Thanks for this helpful explanation. I am really enjoying your series of articles – it is the principles that are most useful for beginners. Please do not be put off by the unduly harsh criticism of others.

    2016/11/20 at 11:14 pm
  • From Paul H on Options: Trade 6, The Boy Can't Help It

    There is sod all point in “keeping things simple” if by doing so you make utterly incorrect statements and claim them to be fact.

    Please show your workings for “trebling your money” beeing the same as “a 300% gain”. If you start with 100 and end with 200.

    How much is your gain?

    a. 50
    b. 100
    c. 200

    Have you:

    a. doubled your money and made a 100% gain.
    b. doubled your money and made a 200% gain.
    c. failed year 7 maths. Again.

    Regarding buffer, marin, returns, I am not “conceptually right”, but FACTUALLY correct. You are peddling 100% nonsense. If you reserve any buffer AT ALL against possible market movement against you, then that is, by definition, being used for that trade and is therefore “capital employed”. It matters not one jot how it is held. You yourself stated that your would only use 25% of available funds against a trade. So if the MARGIN for that trade is 100, then you have to have 1400 in your account and ALL of that 400 is employed. (And you CANNOT use this equity against any other trade). If you wish to base any ROCE return calculations then THAT is the figure you have to use.

    But I am getting quite annoyed at your continued inability (I hope) or deliberate unwillingness (I hope not) to understand or acknowledge basic truths and I have wasted enough time here. The above should not need spelling out in such detail for someone who claims to be au fait with Greeks (which are very complex compared to the simple sums above) and experienced enough to teach others; I suggest you go back to doing what you appear to be good at – trading on your own account. If you continue to (try) to educate others here, you will lead some down a completely erroneous path which, when the sh1t hits the fan, is liable (if they believe your claims on rewards and risks) to leave them over-exposed and in deep do-do.

    2016/11/20 at 1:52 pm
    • From Terrapin Trader on Options: Trade 6, The Boy Can't Help It

      perhaps this is not for you as you seem to have a good overview of options. I tend not to focus on such diversions as margin,as
      this site is for people taking first steps and they will be a long way from even opening an account. We will get into how margin works at some point,but I have never yet met a trader who actually uses London SPAN and gets hung up on it. As I said margin could be stocks or bonds,not simply cash so it’s a matter of personal risk profile as to how much you use-this is waaaaay beyond the steps we are discussing here-and these trades are just examples.My deeply flawed scribbles are simply that. It’s good that we are challenged,but the returns are real and way beyond most other forms of trading.You are evidently aware of this and making serious coin.
      You may prefer to look at some of the excellent US sites or Taleb for a more sophisticated approach. All the best. TT.

      2016/11/21 at 9:23 am
  • From Terrapin Trader on Using The CBOE Calculator-It's a Bit Clunky But Worth It

    If anyone is having difficulty using the calculator please let us know-we can, at the moment, answer each enquiry individually and the aim is not to look clever (trust me that ain’t on the cards) but to give you a head start in your trading journey. There are NO stupid questions.
    When I started trading there was nothing like this- but when you see how the options business has grown in the US you have to question what the heck is going on in the UK.
    I might be tempted to say vested interest but I have no desire to create enemies, so let’s say that the financial establishment assumes we are all too stupid to trade financial products-and that applies across the board. The US looks more kindly on its retail traders.

    2016/11/20 at 9:59 am
  • From Paul H on Options: Trade 6, The Boy Can't Help It

    “It’s actually the return on capital employed”

    No. It REALLY Isn’t.

    “I bought for 3 and sold for 9. Is that not a 300% return on capital employed?”

    So, you capital employed was 3. Your profit was 6. That is a 200% return. Worryingly incorrect understanding of incredibly simple concept.

    “I base trades on margin at entry and yes it is elastic but for our purposes we always assume only using 25% of an account”

    So now, by your own admission, your previous example of 15% return is exaggerated by a factor of four – even without any further caveats.

    Paul H

    2016/11/19 at 11:23 pm
    • From Terrapin Trader on Options: Trade 6, The Boy Can't Help It

      Thanks for that Paul, as I said I’m not an accountant but I assumed if I trebled my money I was making a 300% gain-seems that’s wrong too. As regards the return on capital employed- I am talking about the amount of margin required,and the return on THAT sum of money. You can hold margin in equities bonds and so on, so while you are conceptually right, I am referring here to the amount of capital you would need as margin for one lot of that particular trade.I am trying to keep it simple. The purpose of this site is to help people understand the concepts of options trading, and to build on that understanding- anything else is just dumb luck frankly, but thank you for pointing out my accounting errors

      2016/11/20 at 9:53 am
  • From Richard on Options: Trade 6 another win, so what's the lesson?

    I would like to try the ivolatility calculator, but what is the symbol for the FTSE 100 option? It is not clear at all. Thanks.

    2016/11/19 at 4:04 pm
    • From Terrapin Trader on Options: Trade 6 another win, so what's the lesson?

      Hi Richard- there is no ticker for FTSE as it’s the CBOE calculator,so not linked to the UK market.
      We have no calculator AFAIK,we are so poorly supported in the UK-so just use the closing price of whatever
      underlying you are using.

      2016/11/19 at 6:03 pm
  • From Terrapin Trader on Options: Trade 6, The Boy Can't Help It

    It’s actually the return on capital employed, Paul I’m no accountant but that is the fact of the matter- I have no wish to create any kind of illusion these are real numbers, I’m sorry you feel I am pontificating. I do not know how else to say this. There have been 6 trades-some of which were debit trades-and for example one of my own that closed today- I bought for 3 and sold for 9. Is that not a 300% return on capital employed? Time period was 3 weeks, however.I am not annualising as that would be false. I think your Dec RDSB 2000 puts were 56 and are now 34, but margin was big I think. I base trades on margin at entry and yes it is elastic but for our purposes we always assume only using 25% of an account,so a margin call is unlikely with an index. I have not traded equity options for about a decade so cannot recall the margins

    2016/11/18 at 7:40 pm
  • From Paul H on Options: Trade 6, The Boy Can't Help It

    I thought you had agreed that your previous statement of 15% per month return was bunkum?

    It is not 15% on ROCE UNLESS both of:

    the position never moves against you; AND

    You allocate 100% of your available capital to the margin for the trade.

    Maybe the title of this thread really does say it all, and the Boy Really Cannot Help Himsef – when overstating his returns?

    Best I leave it there, I feel, and go read, pontificate and discuss options elsewhere.


    2016/11/17 at 11:20 am
  • From Terrapin Trader on Options: Trade 6, The Boy Can't Help It

    Any of these trades can be done as multiples or in ratios too- a spread can have 1 long, 2 or 3 shorts. A calendar spread can use different strikes so the far month is not so costly-this is called a ‘diagonal’. When you get used to the language you will visualise the trades.
    When you start to find a style that suits you, you can say goodbye to all that gut wrenching emotional nonsense from trading forex/futures/stocks. You can construct trades that suit you instead of chasing the market.
    Options traders tend to keep quiet about things-very much like insurance companies-they look dull and boring-yet check out their headquarters-they do not operate in a shed. The smart money always wins. Think of yourself as the insurance company first and then the artful trader next.

    2016/11/16 at 9:45 pm
  • From Terrapin Trader on Options: Trade 6- Aiming to Lose

    Paul -we are on the same track, I had no intention of misleading anyone-I’ve been trading options profitably for 16 years. I’m not a good trader, and I’m an even worse author and proof reader,it seems. However I am passionate about options and passionate about an industry that sucks the life out of people’s accounts with bogus claims, outrageous charges for investment advice and appalling returns. Options, in my opinion, are the only trading vehicle that gives people a chance by becoming educated.This site is a stepping stone, a conduit to get people to find their own way. It sickens me that when it comes to money matters people are completely misled. Even worse they give up due to lack of information-such as prices being hidden to the public.
    Thank you for commenting and showing a real trade,and yes margin can increase-I cannot find what effect the huge drop on Aug 24th 2015 had, but I think margin may have increased by up to 50%,and my broker had issued a warning about margin calls-something nobody should ever experience- I’ve never come close,thankfully. Naked selling is not for me.

    2016/11/14 at 8:53 pm
  • From Paul H on Options: Trade 6- Aiming to Lose

    But I can’t edit my reply, so that my incorrect 33p premium and subsequent calc is wrong…I was looking at the wrong price and it should be should be 56p and thus:

    56 * 1000 / 20000 * 365 / 32 = 32.0%


    2016/11/14 at 8:25 pm
  • From Paul H on Options: Trade 6- Aiming to Lose

    Hmmm…..I had not realised that you were able to rewrite history so that your initial post.

    In this case there is no great damage, though the statement is still not completely correct as ROCE is only as stated so long as the position does not move against you. If margin increases at any time during the life of the contract, ROCE will change. Also, given that a prudent trader will only allocate a small portion of his available margin to any single trade, then true ROCE is rather lower than that stated.

    However, I have deep misgivings about a discussion forum where posters can go back and change things. You have no intention of doing so, I’m sure – but that’s not the point. The TMF “no amendments”, or the Stockopedia or LemonFool “5 minutes to correct typos” time window are much better in giving readers total confidence that all is kosher.

    (For my own calcs, I use the strike price to calculate ANNUAL return, aiming for 20%+ on any single trade eg, prices from yesterday:

    RDSB Dec 2000 puts. 33p. 32 days to expiry. Return =

    Premium (in pence) times 1000 (shares per lot), divided by strike, times 36 (days in a year) divided by 32 (days to expiry), so

    33 * 1000 / 20000 * 365 / 32 = 18.8%

    This understates my potential return as it is unlikely in the extreme that RDSB will go to zero – but it works for me to throw up potential trades. And I always prefer to understate and overdeliver than the opposite.


    2016/11/14 at 8:18 pm
  • From Paul H on Options: Trade 6- Aiming to Lose

    risk to reward will be about (margin=£1200, credit from sale of options= 7+11.5 @ £10 per point=£185/£1200= 15%.

    Oh, dear me NO. The above is either naive, misguided, or deliberately stated to give apparent huge returns.

    MARGIN does not, in any way shape or form, equal RISK.

    If the FTSE shot to 7100, the loss (unless closing out; at what cost?) would be in the order of £1800 – where then your risk reward?

    2016/11/14 at 1:16 pm
    • From Terrapin Trader on Options: Trade 6- Aiming to Lose

      Paul I have amended my text and thank you kindly for your diligence. I am not trying to sell anything, I am trying to be 100% honest-and making mistakes is just me being an idiot. I’m not a good trader and Ido not say hthese are good trades,they are an attempt to enlighten. I’d be very happy for the FTSe to hit 7100 by expiry as one of my own positions would gain nicely.In this example if ftse hits 7100, I will show how to adjust.
      I will check back on other posts,and have no intention of misleading people.

      2016/11/14 at 7:18 pm
    • From Terrapin Trader on Options: Trade 6- Aiming to Lose

      No you misunderstand- this is ROCE-return on capital employed-the risk to the upside is unlimited in theory.
      You are quite right. Thank you for paying attention. I was hoping to use this trade to illustrate how risk can be managed
      when things go wrong.
      However this trade and many others DO produce huge returns in terms of %age

      2016/11/14 at 7:10 pm
  • From Terrapin Trader on Options: Trade 6- Aiming to Lose

    Nobody has 6 out of 6 winning trades- so let’s see if the market tanks or gets the hots for Mr. Trump’s new model economic miracle. If this trade is a winner I’ll eat my hat or the calorific equivalent in beer!

    2016/11/13 at 3:13 pm
  • From Terrapin Trader on Options:Trade 5 - a New Hope

    Well….. today could have got about 45- >100% return- I thank you!
    Seriously these are random trades and I pointed out why this was not a good trade-but it’s another chunk of evidence to suggest that even bad trades can make money with options. This is just a freaky market- I do not believe anyone is making considered trades-you cannot factor in all the unknowns,so had I taken this trade, I would have closed out for a very nice 45.

    2016/11/10 at 10:04 am
  • From Terrapin Trader on Options:Trade 5 - a New Hope

    at close the trade was worth 26- I can do no wrong!

    2016/11/09 at 6:07 pm
  • From Terrapin Trader on Options:Trade 5 - a New Hope

    failed to look at yesterday’s prices but today after the bounce, the trade is flat at around 21-most unfortunate market action last week and hold the champagne for this week’s roller coaster. So -if you were expecting the bounce today,we may have had it and we’d close out for a small loss -commissions

    2016/11/08 at 9:36 am
  • From Terrapin Trader on Options:The Trader Journey part 2

    In ’99 and 2000 I had a share portfolio and I was on a long journey reading the FT. It sang the praises of Invensys- a share I bought. A few days later it was less sanguine, calling it ‘troubled engineering group’ Invensys.The price plummeted.
    The pundits are not idiots, they simply do not know what really goes on-so why try to board that train? It breaks my heart to hear so many sob stories about shares-we’ve probably all been there.
    I was in the USA when Enron was flying high- I asked why they were selling electricity at below cost price, and nobody seemed to care, now I’m no accountant but…..

    2016/11/06 at 2:19 pm
  • From Terrapin Trader on Options:Trade 5 - a New Hope

    At some point in the future we will look back at these early trades and reinvent them, using the prices of the time.
    We aim to show how many different ways there are to take the same view. How to optimise the trade rather than trying to optimise ‘or curve fit’ to a trading system.
    We will show how you can trade with defined or undefined risk so long as you are aware of the mechanics of the trades.

    2016/11/06 at 1:12 pm
  • From Terrapin Trader on Options: The Trader Journey- First Steps

    We would be happy to get prices* within reason, but you can open a demo account with some brokers, like Interactivebrokers IG(spreadbet but you can take the mid price of the spread- if they quote 8-12 it’s probably around 10 in the real market). Other brokers are available Saxo, Berkeley, ADM
    * I have screenshots of end of the week prices going back umpty years

    2016/11/03 at 5:00 pm
  • From Terrapin Trader on Options: Trade of the Week 4 Defined Risk With a Long Spread

    Richard, welcome by the way- and you are right to question everything. I hope it is clear, I have posted the closing prices from the 2 puts at the bottom of the article.
    I love options because there are so many different ways to trade- and we put these trades up for fun-and we can follow the progress-but honestly 40% profit is good,100% may be on the cards tomorrow. Please feel free to comment, we aim never ever to offend or try to humble anyone. We’ve made dumb mistakes and part of our process is sharing with others,but I will not share my real trades in case anyone gets misled. All the trades here are for fun,using real prices, no smoke or mirrors.

    2016/11/01 at 6:54 pm
    • From Richard on Options: Trade of the Week 4 Defined Risk With a Long Spread

      Thanks TT. I am fascinated by options – the most sophisticated form of trading I have come across, and with the big advantage that risk can be controlled (in theory). The problem is, from a UK perspective it is so difficult to get enough information to take it any further. Are there any brokers who even want to take retail traders’ money? And where do you find current prices for UK options? It is so different in the US – but then they do not have spread betting, I suppose. I am very pleased that you have started this blog. Textbooks are all very well for theory, but what really matters, and what I am hoping you will cover, is how you adjust positions when the market goes against you.

      2016/11/01 at 8:33 pm
      • From David Eppel on Options: Trade of the Week 4 Defined Risk With a Long Spread

        Hi Richard-yes I was hoping this might go wrong too! The trade is now worth about 36-so a 100% gain. When I first started there were no books, and I paired up with another person to do the Optionetics course which was ok, but I think we could have a one day class of really nailing down everything-again this may not be for money but for our own benefit as traders too. We learn by understanding what others need to learn. We have a Meetup group but London is not so accessible for everyone.I am hoping by showing new trades each week,we can build up a picture from simple one option strategies to multiple legs and trade repairs. There is nothing like the world of options,and once hooked,just looking at a chart of an equity just leaves you cold-you look at an options chain,though and a whole world of possibilities opens up. We welcome all comments,good bad or indifferent.

        2016/11/02 at 9:01 am
        • From Terrapin Trader on Options: Trade of the Week 4 Defined Risk With a Long Spread

          Tonight’s prices 114 and 72.5= 41.5 on a trade that costs 18.5

          2016/11/02 at 6:41 pm
          • From Richard on Options: Trade of the Week 4 Defined Risk With a Long Spread

            Remarkable result. How do you decide when to close the trade?
            Are live prices available from iVolatility or ICE? What is the code for FTSE100 options?

            2016/11/03 at 5:11 pm
          • From Terrapin Trader on Options: Trade of the Week 4 Defined Risk With a Long Spread

            Hi Richard-well here’s the thing- you can never know when the market will turn and take back your profits. How can anyone know? You just have to set a reasonable target – I sometimes have a maximum possible profit of 100 and will settle for 40-out of those possible 100s yes a couple have gone all the way,and some have gone to zero so fast as expiry looms and the market has its own ideas about whose money you have!
            There is a school of thought that suggests random entry is as good as any and exit is everything. Van Tharp(Google him) has some words on that.
            Some forex traders move their stop to break even to avoid losses-no idea why, and with options we can choose to close out a portion of a trade to give us a free trade-as with this put spread. By doing multiple lots -say for example you did 5 at 18.5, your cost is is 92.5, the market hits 47,you close out 2 and leave the remaining 3 to collect the maximum 100 or near enough.I won’t go into other strategies but you can take a chunk of profit and still have another profitable trade running,as option strategies allow us so much flexibility, unlike those poor souls trying to trade in one dimension. Delayed prices can be found on ICE-see the link in anotherpost here-you have to register,and then you get a dropdown of all the equity options as well as FTSE100. We love dialogue here, and hope to offer personal insights that others may find useful.

            2016/11/03 at 11:28 pm
          • From Terrapin Trader on Options: Trade of the Week 4 Defined Risk With a Long Spread

            now!!!! 144 and 96.5 I’ll let you do the math/s

            2016/11/03 at 4:54 pm