Trade 112 Week Ending 28 December- Keeping Our Cash Safe

What The Actual?????

FTSE vSPX 2018

A Wild Ride This Week

So, nobody was more relieved than I that the US markets smashed up in record trading after horrible falls. Though it’s silly season, it is unsettling to see such huge drops. We also saw 10 consecutive down days on the SPX. Maybe it was algo’s pension funds with surplus cash. It does not matter. Thus after a crazy week we are about 20 points lower. Not a squeaky b*m moment so much as a ‘Seriously?’ couple of days. Experience tells us we trade options relationships not direction. Thus being long and short is a good place to be and a 6% drop is not a problem. A 10% drop can be managed. Naked put sellers must have been royally ‘smoked’. That easy money came with a hefty price tag. We can only hope they didn’t ‘bet the farm’.

Year End- where Are We Now?

The good news: FTSE PE ratio https://markets.ft.com/data/indices/tearsheet/summary?s=UKX.P:FSI

Yikes! A drop of about 50% on the year. It must be cheap now surely?

Those long term buy and hold folk must be savouring the prices, and considering easing back in to the market if they have ever been out. Cash sitting on the sidelines earns no reward- I’ll get to that.

So 2018 what sort of a year was it?

January opened at 7,687.77 and we have one trading day left, but Friday’s 6,733.97 shows a loss on the year of 953.8 points or 12.4%. £1,000 invested on Jan 1st would have to earn about 15% to get back to break even. So that would need some pretty spectacular work from fund managers, who may need some sharp focus from here.

My own 2018 has been excellent, though I don’t like to count my chickens until the Jan trade is done. Rubbish trading is of course my forte,but bimbling along as I do, I seem to make good profits. Idiot me still does dumb stuff, taking a silly naked short call position back in the Summer. The market smashed up, but for my sins, it plummeted the next month. I can carry those trades for a long time, though it cost me dear in the 2003-2005 era. I dislike calls and trade them badly!

Trade 111 -A Way To Go Yet But…..

I had previously mentioned legging into this, buying the higher 6650/6550 put spread and waiting for a drop to sell the short 6500/6400. I was not able to track this during the holidays but that would have been fabulous. As it stands, we are sitting on a tiny loss of 1.5. Therefore nothing is to be done for a while yet. Expiry could see this work very well indeed, which brings me to the thin market trade

Trade 112 Safe As Houses

This trade is delta and gamma neutral. We have no time decay, and no volatility exposure. We have no possibility of a big loss or indeed, any profits. Trade 112 is…. sitting on the sidelines. Yes, having no positions IS a position! Frankly anyone trying to make sense of this crazy highly volatile, thin volume period, needs a PhD in prediction. Ignore this horrible time, is my considered position. But… this may be Paradise compared to the upcoming ‘B’ event on 29th March. We aim to keep safe, paper trade the heck out of it, why not.

Personal concerns about 2019

My own blizzard of daily financial emails usually yields some good stuff as shown below. However, we have so many issues facing us in the next few months that it’s hard to put a positive spin on any of it. We must hope we have a ‘John Mauldin’ muddle- through type market. The High Street is dead,we are killing the planet. Russia just got hypersonic undetectable nukes. America has… Trump. China is determined to be number one, the Middle East is anyone’s guess. The UK has the ‘B’ word and the EU could be going awry. Smart people will find solutions, and life will change, hopefully for the better. Peace should be the global objective, I believe that is the Xmas message. And …

Thanks to Black Swan Man Nassim Taleb- a lone smart voice?

And this: note-you can speed up the dialogue, it is lengthy.

The Eurozone- What Could Go Wrong?

Filed Under: FeaturedInformativeLearnStrategiesWeekly Trade Idea

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About the Author: First found out about options in 1995.From the arcane magazine Exchange and Mart! First trade- a covered call on VOD in 1999. Made 10%,VOD almost doubled. That's when I realised I was not a good trader,and I was forgiven thanks to the amazing world of exchange traded options

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