Trade 106 Week Ending 16November

A Bit of A Drop, Take a Break, Sit (See what I did there?) 

Guffaws of laughter, conspicuous by absence! I love wordplay and enjoy humour in our bewildered media. Nobody can honestly have a clue what it now means to stay in or leave the EU.  The overly lauded economic growth is a symptom of debt. Looks like the wheels are starting to come off the German car industry-car sales were down here too, remember, so no surprise. Again nobody has a clue about diesel petrol, fuel cell, electric cars,hybrids, self driving cars. The end of private ownership? Thus technology gives too many choices. If you’re not in the car industry give a ‘hoorah’. We are very far from the horse/internal combustion engine revolution 100+ years ago. Cost was key at the start of the 20th century. Now it it mostly irrelevant. Nobody buys cars, they are ‘financed’.

Clueless in Strasbourg, Woeful in Westminster, Lacklustre in Luton etc

So, what is a potential car purchaser to do? The problem it seems is one of prediction for the makers- get it wrong and your business dies. Thus for the buyer we also stand to get a hiding. This is just the private transport sector, what the heck else is in the pipeline? Brexit? We cannot begin to imagine the implications of staying in or leaving the EU. There are no facts. Thus we cannot make a calculation and guessing is the preserve of the mystics.

I will end this economic/political rant, other than to say I think  that we are lost in world politics, and so it seems are our leaders. Thus if Brexit was an optionable event you’d be weighted most likely towards a long put strategy. We’re told to assume the effects will be bad. Nobody’s looking at the ‘indifference option’. How if life goes on pretty much as it has for the last 4 decades? We’d want short premium to reward us, in addition to having some ‘skin in the game’.

Trading, It’s About Trading. GBPUSD Whatever.

Easy to lose sight of what we do. I think the market has been very kind to us, but let’s look at last week’s offerings:

Trades 103 and 104 turned out nice again. 105? Choices were a) call ratio spread -a credit of 2.5, it made a credit of 6 to close, so 8.5, or around 6% on margin employed.

The future- long made 50 or £500 on margin of £3,500 -blind luck I’d say. We have to go again though, so we’ll be long at 7040(friday’s close)

The stock…..oh dear oh dear. I’m not good at stocks- we bought Dixons Carphone PLC at 173.3, now 161.5 ( 2,000 shares )loss of £236.

Trade 105 long put and call spreads ( 6900/6850 puts ) (7350/7400 calls)  and short one put. Now standing at a debit of 2 to close.

Trade 106 Call Me A Cheat, But I like What We Have

Never add to a losing trade is the perceived wisdom. That is for directional traders, whose stock is falling out of the sky, in my opinion! I would absolutley look at doubling up on Trade 105 and reducing our entry cost. We would thus have 2 lots of lots. The first cost us 5, the second is a credit of 2. Therefore our median price is 1.5. Our risk remains at 6400 only. The logic? My views have not changed, the market is more baffling than ever.

Trade106 Another Bite of the Cherry

Another of those trades where I don’t understand the pricing. It’s the ratio straddles* again. I’d look at Dec 7000 calls=143 and puts= 117 total 260. Looking to sell 3 of these and buying   2 January 7000 straddle calls= 175.5 and puts= 155.5 total 331. We now have (260×3)- (331×2)= 118 CREDIT.

My only basis for this trade is that I have monitored straddles for some time and normality would be when 3 of the near month are roughly the same value as 2 of the far month. Thus we have a bit of odd pricing, for which I offer no understanding. NURSE!!!!!!!!!

*remember a straddle is a long call and long put at-the-money.

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 106 another bite… credit to open 118,cost to close 84, so a nice 34 to trouser for a clueless trade! I don’t think it ever looked like a loss from the open.
    Trade 106 pretty much even money currently
    Futures? You might have got stopped out, run 100 points up, I really have lost track of how this might have been tradeable having no method. These reversal days are complicated and suit option traders perfectly, IMHO.
    Dixons Carphone 164.4 -creeping up a tad.

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