Trade 136 Week ending 14 June

That Was The Week

We saw FTSE rise again to the dizzying height of 7420, and back down to reality at 7345. So next week is expiry week and personal positions need the old ‘F’ down to 7300. We close out our Jun expiry cycle trades and show >10% profit on the month. This is a frivolous exercise, however and readers will be advised to make up their own minds on trade entries, exits and size. Thus, making 10% a month simply plucking trades out of the air*, shows how options can work. Therefore, the complete opposite of stocks, futures etc. They all need to get direction and entries right. They have to withstand a run of up to 10 losing trades. And we know they get whipsawed.

It is so tempting to run a futures account with random entries-on paper of course. While I greatly admire those directional traders, it’s not for us. We like the consistent profits -shown beyond doubt over our 130+ trades here. Genius not required, just a change of mindset. Lottery ticket buyers overestimate their chances of winning, but happily accept inevitable losses. Lottery ticket people we are plainly NOT.

Something For The Weekend

Americans-they get everything-why don’t we have this? Oh, we do! https://www.coursera.org

The internet is amazing for 2 things – education, and all the other stuff we should not be looking at, or getting for free (Youtube for fantastic music and links to new artistes ).

Aside from the best options course ever: https://21stcenturyinvestoreducation.com/page/tce/courses/?sid=100981990

Wannabe traders are sometimes lured into being the ‘eternal student’ fearful of putting cash on the line. While caution is good, fear is to be addressed on day one. Thus education is our best, our only weapon.

This trader sampled offerings from such as Futurelearn which has provided me with some insights on a variety of subjects. Educators seem quite chilled about free content. Learners such as oursleves are lucky to live in such an age. I include myself in the category’learner’ after 20 years trading, having always been an outsider. Thus I relish the flow of great content.

The Numbers, The Trades, The Profits

 

Firstly:The legacy trades:

Just 134 and 135 exiting.

Trade 134 now 12, paid 20.    7100 call= 250  7200= 153.5×2  and 7300=69.  I think we take a small loss 20-12= 8.

Trade 135 Sold 3 Jun7100 puts(10) bought 1 July 7100 put(44). 44-(10×3)= 14.

Now June puts are 2, the July 7100 is 30. Close out take profit 24-14= 10.

We are trading the hypothetical £50k pot so that’s 10 lots of Trade135, profit £1,000 minus comms, one lot of Trade 134, which lost £80+ £40comms. Let’s be miserly and assume £200 in comms, leaves us £680.

The June expiry thus gave us: Trade 132 profit £1650 Trade133 profit £2700 Trade 134 loss £120 incl   Trade £135 profit £1,000- £200 comms=£800. 

A return of £5,030 nett on margin of £50k

Trade136 Low Volatility Play

Patient and cautious traders will like this- Iron butterfly for credit of 83, risk 100-83=17.(at <7250 or>7450) We are selling the 7350 straddle buying the 7250/7450 strangle. 5 lots= £5,000 margin. Here’s the skinny: 7250 put 61.5, 7350 put 98, 7350call 94 7450call 47.5. Logic of the trade- super low risk, but we can adjust with market moves. The outer strikes may well spike up with vol. We may close out early and take a modest profit –20 would be fab.

* I am no genius, nor do I have any insights.

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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