Trade 139 Bit of A Mixed Bag.

FTSE confounds this trader!

Gloom In An UP Week, And Apology- Google No Longer Gives VFTSE

We watch FTSE, along with just about everything else, rampage upwards again. Thus this trader is wrong again, with my annoying  downside bias. Cynicism is not rewarded,suspension of disbelief, however, is. While, for many traders having a view on the market gets expensive, FOMO* is hard to resist. This trader sees nothing to trade as volatility is in the doldrums, or it’s been banished to Dantooine.

*Fear of Missing Out- otherwise known as the boredom trade.

What Do Our Trusted Sources Say?

Erik Norland at CME,one smart cookie suggests this: https://www.cmegroup.com/education/featured-reports/videos/high-risks-low-implied-volatility.html?utm_source=linkedin&utm_medium=social_post&utm_campaign=economic_research&utm_content=20190703

We like Erik.

We do however take a pinch of salt with  https://www.marketwatch.com/story/more-americans-are-having-trouble-sleeping-and-the-reason-may-keep-you-awake-too-2019-06-27?mod=mw_latestnews

Though it’s not cool to run with the crowd who are in a buying frenzy. We know economics and stock markets are strange bedfellows but maybe this makes sense as we measure SPX/GDP https://uk.tradingview.com/chart?symbol=SP%3ASPX%2FFRED%3AGDP

I am not normally looking for a pointer to suggest more upside,as it’s a given. However it gives us no edge to trade,we need movement which gives us volatility.Volatility leads to profits,profits lead to indulgences!

Our Three legacy trades:

Trade 136 originally  83 ( ( 7350 straddle 126+36.5) 7250 put 7450 call 19.5+ 59.5 ). Now 94– so a losing trade,but in for a penny etc.

Trade 137

So, we bought the July 7150 puts(21) and sold twice the amount of the 7000 put (10). Debit 1. But it’s still worth zero.

 

Last Week’s  Trade 138

Though it’s in an ugly market, that may tear away. It’s…….

Box of frogs time!  We sell 7250 put  buy 7550 call– a risk reversal or combo, as it’s known. Both options are worth 19.5 so the cost is zero. We chose to exit on Monday-(TRADE138win and close- we’d have done 5-10 lots. So from a cost of 0 the trade went to 34 for the calls and 7 for the puts= 27).On the 3rd July we could have got  (59 – 4.5) = 54.5.

Here’s a thing -you can of course adjust a winning trade-check this! What if you sold the 7500 call for 92.5? You now have a short spread with risk of max 50, if FTSE goes above 7550. You’d still have 92.5-50= 42.5, and need a bit of margin, but it’s a great trade. You win if the market plummets or shoots up. Peachy? Oh yes indeedy.

Note-even on the Monday we could have sold the 7500 call for 59. Giving us a bulletproof profit of 9 or better.

Trade 139

We sell the 7650  call and buy 7400 put. We thus take in 14.5-12=2.5 so it’s a tiny credit.(Some margin needed)This is not an ideal trade as FTSE has already had 2 rare down days, but it’s hard to sell puts in a terrible low vol environment. Who knows if the FTSE will hit 7650,this cycnic thinks it’s very fortunate to be above 6,000! 

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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