Trade 115 Week Ending 18 Jan, and Expiry.

A Gentle Reminder

Volatility was at 24 a few weeks ago. We saw it stay above 20 for a few weeks. Very high vol never lasts long, low vol can last a year. We saw 6.19 low and a brief spike at 16, in 2017. Dumb money flows back and forth and people’s opinions change. No particular reason needed, it’s just a market. Thus old traders, bold traders, and ‘noobs’ all try to make sense of something that may not possess any sense. Recall the city council of Troy deciding to bring the wooden horse inside the city. So, what could possibly go wrong? Groupthink, therefore, can produce the worst possible outcomes, and the market, like a virus, likes to get nasty with as many victims as possible.

Trading is about not knowing. there is one key element we do not know- the future level of the FTSE. So, that is a pity as it is what we really would like to know. Can we even have a clue after the event-like Friday’s bizarre buyfest? Doubtless there are pundits who will tell us it’s Trump,China, short covering,manipulation, liquidity. So the list goes on and it does not matter, we cannot change it. Although…….. there may be some ancient deities that can. Check out the London Mithraeum:  Bloomberg’s own deity of Mithras! (They have paid for the exhibition, which is amazing) Does Mithras wield power over the markets though? On a serious note……..

Catch up- How did We Do With Expiry and All?

Trade 111  buying the higher 6650/6550 put spread and waiting for a drop to sell the short 6500/6400– when done as one trade a, debit of 12.5 that never did better than 8. Looooooser!!!!

Trade 112 Mimicking a skewed SPX  Iron condor Feb expiry

puts 6100, 6250* risk 150  *short strike 7.6% otm  credit 20 now 2 to close out
calls 7150*, 7250 risk 100   *short strike 6.3% otm  credit 13 now 16.5 to close out

Trade 113 We are buying the Feb 6950 call and selling 2x 7000 calls for a credit of 26×2-40.5= 11.5. Expired worthless, so we keep the credit 11.5  but no more profits

Trade114 We are buying the Feb series. Puts 6800 paying  96.5 selling the 6700 for 68.5 and selling the 6600 for 48.5. Our trade thus gives us a credit of 20. This could now be closed out for 0. Or you could sit on it and wait for even more credit. And yes- I missed it!

Trade115 This Time It’s The Same

Looking at the same 6800/6700 put spread-this now trades for 18.5 and might be a buy while vol is so low. We could sell a 6500 put for 12, reducing our cost and giving us some modest risk at 6400. The recent low was 6600 so this may not be a bad call-no pun intended. Or we could wait and see and ‘leg in’. Perhaps selling a call against the put trade if the market moves up again, and buying more spreads to average out a better buy price. I feel some position building in the pipeline,and intra day moves will have to be watched, or limit orders placed, with a move either way. I hope to update during the week, as trading should be dynamic.


PS Monday is Martin Luther King Day in the US- a bank holiday, don’t expect a lot to happen when the grown ups are away!


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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