Up Down, More of The Same
Barely a move, yet Tuesday being 45 days to expiry (DTE) would have served me perfectly with my December put strategies. I didn’t of course take the trade. Because,(scaredy cat me) in the last couple of months there was one entry I happily missed. FTSE dropped hugely. Would I have been in trouble? I’d have been forced to adjust but likely I would still have been in profit. I look at risk first, and foremost, secondmost and lastly. Why I trade is for the rewards. How I trade is with my feet planted firmly on the ground. Like piloting a plane- there’s a checklist before take off. Did I mention I’m a rubbish trader?
That Mid Term And Meltdown in The White House
I think we can all agree to avoid that discussion, but what is the takeaway from such events? Wonder if there’s an advantage to be gained?
I have no idea if this is remotely worth even a second glance but it makes strange reading. Why would the US market go so crazy upwards? Counter to these stats why would this continue with the market hitting an all time high so recently? Do these second half presidents take the brakes off the FED?Here’s a link to the article: https://www.vantharp.com/trading/2018/11/07/mid-term-elections-are-over-now-what-by-d-r-barton/
I am wary of stats especially when they are so compelling. And selective. What were the pre-existing conditions? Is this 1st of the month to 1st of the month? How volatile were these periods? Stats tend to be one dimensional, and in my experience we need context. Looking back at the last 2 such events- 2010 we saw the markets bottom in early 2009 and it was a 45º upward slope from there. 2014 Obama had been doing ok despite the GOP blocking him at pretty much every turn. Jobs came in big, the global economy was ticking along nicely. FTSE went up 500 and down 500,ending pretty much flat. Suits me,sir!
Trades 103,and 104
How did we do? Embarrassed, in a word. 104 Big Butterfly: buy 7000 put 54.5, sell 2x 6850 puts (24×2) buy one 6700 put 10.5. Debit 17. Max risk 17. Closed for 25. WIN
103– Straddle 6900 calls at 112.5 and 6900 puts at 127.5= 240. Closed out for 190 Fri morning. WIN
In both cases it’s about the exit -and choosing when to take a profit. Fear and greed are the twin evils in trading, and you can all but eliminate fear by understanding what you are trading. Greed? Well that’s personal but if I have a max poss profit of 100, and an entry cost of 17, I’ll take 25 all day long. Traders taking in a credit might look at early close out taking >50%. I should point out that we never talk about size. One lot yielding around 50% profit is not going to buy the Tesla, but trading small and often gives you the confidence to step up, in your own time.
Trade 105 -Go For Expiry Trade or December Series?
Quickie for Nov expiry –7100/7150 call ratio spread for 2.5 credit (47.5 and 25×2) We are buying the 7100 and selling 2 of the 7150s- risk therefore at 7200. Max profit 52.5.
Trade 105, and a comparison
We are traders, not investors,there’s a world of difference. For us an investment is a trade that went wrong! So-as in a recent trade I like the idea of, a short iron condor-which means we are buying the spreads, not selling them as in a traditional IC. The trade goes as follows:
Dec call spread 7350/7400 prices 32, 22.5 Dec puts 6900/6850 prices 71.5,60.5 We are buying the strike nearer the money, so it’s a debit on both sides, roughly equal. But this costs 10.5 + 11=21.5. To get a max profit of 50. I don’t like that debit, what if we finance it by selling a 6450 put for 16.5 ? Our cost now…………10.5+11=21.5-16.5=5. Risk only at 6400, no upside risk. Max profit 50-5=45. Paying 5 to get 45 -that is more like an options trade we can work with. Max loss above 6400 limited to premium paid=5. Below that, we adjust. I can show you how.
Compare and contrast use of capital.± £3,000.
Trade 105 2 lots- max profit £1,000, loss below 6400 unknown, but max loss £100 should FTSE go nowhere.
Buying stock – e.g. DixonsCarphone PLC* at 173.70. Let’s buy 2,000 shares =£3,474.00
Compare to a FTSE future -margin £3,500 at £10 per point. Stop loss at £100? Say £200 to give it a chance FTSE future closed at 7095– We can only go in one direction here.
All the above based on Santa Rally or crazy political stuff!
*We’re buying all that electronic stuff surely? PC World is a monopoly more or less,so Xmas should be peachy ( Should it be red or green though?)
BOOM! The FTSE future went smashing up as the dumb money typically floods in from the weekend. So…we opened at 7095 and we were long. The future went as high as 7156, so to be kind let’s say we actually plucked 50 points there-that’s £500 in old money. A great return on margin 14% in an hour. would we have traded it well though? I would never contemplate holding along future over a weekend-you never know what’s in the news. Anyway this trade beat us in terms of time and profit…. to date. We would of course have to repeat this a few times,be right on direction and be disciplined enough to have a trailing stop. The stock buy- well that I’m sure will now get slammed as the Apple news is not great.
That call ratio spread-enter for credit of 2.5 close for credit of 6. Nice little turn around. Win again. so- we should equate this to the futures trade we got 8.5 on margin of about £1500, 6% return but with zero downside risk and very little upside risk too. That future was all risk, we just got lucky. Future now 7033. Each to their own but I’ve had years of trading futures and did ok but it’s not what you need if you wish to avoid stress.