Discussion Forum


  • 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
  • From Richard on Options: Trade of the Week 4 Defined Risk With a Long Spread

    Please would you explain why the trade went into profit? The FTSE 100 did not go below 6946 yesterday, and VFTSE only went up to 17.0. Surely the put you bought was still out of the money? What am I missing?

    2016/11/01 at 1:46 pm
    • From Terrapin Trader on Options: Trade of the Week 4 Defined Risk With a Long Spread

      the puts are indeed out of the money-that does not change the fact that the prices changed the trade at close today is 31-tomorrow it may well be 35 or so.the 6850 put is now 86 and the 6750 put is 55,price difference between the two is 31.
      I am not being a genius here seriously!

      2016/11/01 at 6:30 pm
  • From Terrapin Trader on Options: Trade of the Week 4 Defined Risk With a Long Spread

    This trade hit 26 on Monday 31st – a profit of 40%. Cannot seem to pick a loser…….famous last words!

    2016/11/01 at 7:45 am
  • From Terrapin Trader on Options: Trade of the Week 4 Defined Risk With a Long Spread

    Just to be clear-the above trade assumes we BUY one 6850put and SELL one 6750 put for November expiry. We do not have to stick to one lot-we could BUY five, SELL three or Seven or Ten,or Twenty.This is just a simple one for one debit spread(debit means you pay for it,you OWN it) By starting with a defined risk trade with the potential to make five times as much,we can do a number of twists and turns,including if it looks like losing money. Remember our aim is NOT to lose money.
    Just for fun imagine we bought 100 of these spreads -spend £18,500 to make £100,000.
    Why would you do that? Well, if you had placed that sort of trade in mid august 2015 or early June 2016……

    2016/10/29 at 1:03 pm
  • From Amit on Options: VIX and why it Means Everything

    I think historically VIX hasn’t remain so low for a quarter. The VIX cooled down after brexit and since then hasn’t crossed 17!

    2016/10/25 at 1:11 pm
  • From Terrapin Trader on Options: Yes, Options Expire- What That Means in the Real World

    UK equity options have variable expiries,and US optionsalso vary-some are settled on the Saturday. FTSE options are simple and it’s easy to remember when stuff happens- it took me about4 years of playing around with equity options to figure out that trading is a process of eliminating as much rubbish as you can. And who hasn’t invested in a stock to watch it plummet the next day? We can fix that.

    2016/10/23 at 4:01 pm
  • From Terrapin Trader on Options: VIX and why it Means Everything

    The UK equivalent to VIX is https://www.google.co.uk/finance?q=VFTSE&ei=IBjOVPhV59nBA4vRgIgK

    It’s helpful to look back and see the relationship between market dips and volatility. Nobody seems to get scared when markets rise-this is ironic really,as the higher markets go,the more likely they are to fall. Volatility is way too low and markets are, for my money, not reflecting true conditions-but the world always wallpapers over the cracks,until the crack becomes a chasm,then it’s time to capitalise even more while the dumb money sells at the bottom.

    2016/10/23 at 3:53 pm
  • From Terrapin Trader on Options: Yes, Options Expire- What That Means in the Real World

    Options are complicated but profit and loss are simple concepts- at expiry my sold (short) options are usually ±5% OTM(out of the money)- eg if FTSE= 7000, I might be short puts at 6650 or short calls at 7300 during expiry week,and sleep relatively well. ITM options- example at expiry FTSE= 7000 and I have sold a 7100 put-I would take a loss of 100 minus premium taken in. Just naked selling, however is described as picking up pennies in front of a moving steamroller.
    The choices with options are staggering and knowing something of those choices,that is the key. This sets options an entire universe apart from the dreary process of buying shares,or the nerve jangling torture of forex or futures trading. Feel free to challenge that proposition!

    2016/10/22 at 12:18 pm
  • From Terrapin Trader on Options: Trade of The Week 2- Anything but Radical, Becomes Trade of the Week 3

    Volatility is key to option pricing-and typically it moves opposite to the market. This combo trade will benefit if the market has a quick sharp shock and volatility spikes up in tandem with the put price increasing while the call price shrinks.

    2016/10/22 at 11:19 am
  • From Romy on Options: Serious Warning -All Options are Not Equal-Think Binaries


    2016/10/16 at 8:31 pm
  • From nnn sss on Options: Trade of the Week 2 -Getting Radical

    So what is the trade. What are you buying/selling?

    2016/10/16 at 1:19 pm
    • From Terrapin Trader on Options: Trade of the Week 2 -Getting Radical

      selling calls to buy puts- a lot of people do it the other way,they sell puts to buy calls,as they are eternal optimists. We are not,
      and so personally prefer to sell expensive calls to buy cheap puts,typically when the market has had a big run up and the volatility is low.

      2016/10/27 at 9:30 pm
  • From Terrapin Trader on Before Shares,There Were...................... Traded Options!

    pensions v property- dumb luck.
    Never seen a well managed fund produce anything other than terrible results,but every property I’ve owned has made money- I got lucky with tenants, and that is a lottery

    2016/10/16 at 1:04 pm
  • From Terrapin Trader on Options: Serious Warning -All Options are Not Equal-Think Binaries

    Another way to think of binaries is like a spread-you sell one option and buy another in the same product- example -buy a 6800 put for 50,sell a 6700 put for 20, you now have a binary outcome at expiry- 1. the spread hits its max value of 100(profit=100 minus premium paid,(50-20=30) so you make 70 on a cost of 30, or 2. you lose 30.
    But…… we can close out or adjust any old time along the way-that is for another time.
    Don’t lose sleep over this…too late, I know you will.

    2016/10/15 at 12:01 pm
  • From Terrapin Trader on Options: Trade of the Week 2 -Getting Radical

    Delta is the rate of change relative to the underlying,and gamma is the rate of change of delta- it is NOT linear. I’m not mad about this trade but I think it will serve to illustrate some valid points -market ‘timing’, choice of weapon, time horizon, opportunity cost.
    The logic is sound the choices in my mind are a bit ugly but we can get a’feel’ for how things pan out-and if the market tanks and this trade makes 100, we learn nothing

    2016/10/15 at 11:19 am
  • From Terrapin Trader on Options: More Great Trading Words from Who Else?........ Winston Churchill

    Every market pundit/commentator will talk about fear and greed-these have to be managed-and I can honestly say my first serious trade(Feb-Mar 2003) stepping into the big time, I made a four figure sum and thought I was on the right track.
    My second trade- George ‘Dubya’ Bush went to war with Iraq,and within a few days my losses exceeded that first trade 3 fold. I had sold calls,very cheaply.
    Worse still, I went on holiday and had not read the matra ‘buy when there is blood on the streets’. War is great for business-it’s awful I know, but instead of denouncing profits we can do good things with those profits-at no time do we have to lose sight of our humanity. We aim not to make idle boasts-it is only right that we talk about our losses,our mistakes, and fallability-so others can benefit. No question is considered ‘stupid’ here.

    2016/10/13 at 1:55 pm
  • From Terrapin Trader on Options: Weekly Trade 1- The Outcome-and it is......... Excellent

    Margin- the money or assets that are required to be placed in your brokerage account,against which you can trade,using it as a surety.
    This may blow your mind,however……
    If you have upside risk like in that particular trade,you could add………downside risk and you most likely will not need to increase margin. In fact the market can only go down to zero but in theory could go up to ∞ (infinity-but no further!)
    So…. if you took this one trade,and only this trade for the whole year, you’d make 11%.
    Somewhat better than the 1% you’d get on deposit

    2016/10/13 at 12:54 pm
  • From Terrapin Trader on First Timers- New to Options Investing?

    By the way-what the car salesman did-that is the same as shorting a stock-you sell something you do not own. Now who would do that? Why your very own broker would rent out shares to people who wish to short a stock. Whose shares are they renting out? Why yours of course! And you thought they were lying idle……
    FYI- ‘Naked shorting’ is when people have not rented the stock, but have taken a short position-this is not like an exchange traded contract which is what we trade. Naked shorting is no worse than naked longs by the way-and in the US a trader who deposits $10,000 has $20,000 buying power-effectively unfairly increasing the price of stocks, in my view.

    2016/10/09 at 11:47 am
  • From Terrapin Trader on Why we do not Trade news

    Typically traders like to fade moves-so there would be for example a big up move,which fizzles out, then everyone goes short(sells),then when that move runs out of steam,they go long. I have read thousands of words on this type of strategy- I’m still here,where are those guys? I hope they made their fortune, but it’s just not what we do-we have massive advantages which over time will become clear

    2016/10/09 at 11:45 am
  • From Terrapin Trader on Options: Weekly Trade 1. Short Call, in a Rising Market

    This is not a trade I would usually take, but if it goes wrong there is always the chance to roll into the next month and wait for the market to come down, and trade adjustment is something that is key to what we try to do,
    so next week we’ll see how the trade has done and make plans accordingly

    2016/10/09 at 11:29 am
  • From contactamipro on Options: Weekly Trade 1. Short Call, in a Rising Market

    Good one. My trade on Friday – shorted NOV 7350 call for 22.50!

    2016/10/08 at 2:38 pm
  • From contactamipro on Trading- Buy a System or Do It Your Own Way

    Wow! I never know one could even buy reviews of systems…

    2016/10/02 at 3:01 pm
  • From Terrapin Trader on Options: Calendar Spread (not my choice of trade)

    Curiously as this trade has gained from today’s movement and in light of recent reserach courtesy of Tasty Trade,this trade made 50-so if you had closed out you would have made the expected 25% return.
    Thus- a trade I don’t like has shown that when the profit is there for the taking, grab it with both hands. This trade may go on to make 100, but over time these only have alimited success rate so you might be happy with 25%.

    2016/09/26 at 5:31 pm
    • From Terrapin Trader on Options: Calendar Spread (not my choice of trade)

      This trade is now worth about 35-so taking that 25% profit was a smart move-we’ll keep an eye on this until expiry

      2016/10/08 at 2:34 pm