Trade 104 Week Ending 02 Novembrrrrrr

Volatility Peaked Then Dipped, on Big Rises and Falls


That Was The Week

In a week FTSE has risen 2.2% from 6939.56 to 7094.12. We note trade volumes much greater on the down days. Volatility remains heightened. Non farm payrolls were ok giving the FED licence to raise interest rates. Wages-the key ingredient in inflation had risen too, adding fuel to the FED‘s fire. Here in the UK we had an ‘ending to austerity’. Though I doubt we had a) real austerity, and b)any kind of ending to the status quo. The last austerity this trader saw was in 1990 when there was much desperation in London as business was in the brown stuff. Cricket lovers will know the commentators like to paint a picture, and the Oval serves well. That year there were no cranes on construction sites as witnessed by the commentary team. Since 2010, we’ve seen cranes in abundance.

London is buzzing but maybe the shops aren’t ringing those tills so much, from my own recent experiences. We have lost more retailers too, this year. But Xmas is coming. Perhaps the tourists will have a last hurrah shopping here before Bre….. you know what I mean

How Did We Do?

Trade 103 was a straddle. We were selling ATM put and call. I was hoping to see this go awry but it dithered around as the dumb money flooded in and promptly retreated. We ended the week 1.5 in profit on a credit of 240, which in real terms meant about £2,000 in margin. It didn’t go horribly wrong, but you could have got in at a better price, 250± which goes against logic as theta was big. I aim never to forget it’s a market that is fuelled by opinions and other people’s money. Thus if there is a lesson here, it is that if you use a strategy, and you expect problems, awareness of risk is the key. Big profits come from good risk management. The risk here was not so unmanageable, but we need to demonstrate how to adjust.

We could have bought £2,000 worth of AAPL at $219, and closed out a week later at $207.48. Or, at $222 on 1st Nov. 2 trades 2 different risk/reward profiles. AAPL will never make you £2400 profit in a couple of weeks from a £2,000 investment. My own analysis would probably have me getting direction wrong 2 out of 3 times with AAPL or any stock. I remain a clueless numpty……….. in profit with options, however!

Trade 104 In Search of The Perfect Trade

Not easy to pick the bones out of this November options chain, but if you fancy the downside somewhat, this looked like a bargain:

Big Butterfly:  buy 7000 put 54.5, sell 2x 6850 puts (24×2) buy one 6700 put 10.5. Debit 17. Max risk 17 maximum reward 150-17=133. Prices suggest this trade is not hugely likely but we are in a crazy period. Anyone else think the wheels are coming off the US political system? The blatant lies and smears are just ridiculous. There will be tears.

Bears Might Want To Note:

The world’s largest economies are generating debt 10x faster than growth.(Source Lakshman Achuthan). Car sales are down 20% and it’s not as if anyone actually buys them. It’s 4/5 personal lease/finance.  I have always expressed my concerns about the market, and my modus operandi is contrarian. The market thinks it’s going up? Thanks I’ll have a bearish position. Tops always get taken lower. Debt is paying for today with tomorrow’s money, and we are not getting any bargains. I don’t get paid for my opinions but I like to express them. Ignore me at your leisure.

So am I bearish? I’m just a follower of the market-it’s a bunch of opinions, just like mine. And…the stock market is NOT the economy



Filed Under: FeaturedInformativeLearnStrategiesWeekly Trade Idea


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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  1. Terrapin Trader says:

    trade 104 now 25- we intend to hang on for more but even so if you bought a stock for £17 and sold for £25 you’d be fund manager of the year!

  2. Terrapin Trader says:

    This was not a trade to take into expiry unless it was deep ITM. Premiums decay faster than a toddler’s teeth these days. Had you run it until today you’d break even- or in our world, lose money!

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