Trade 164 Week ending 10 January

mild disinterest sums this up

Another Week of Nothing- Are We Exhausted?

Perhaps a great many folk are still on leave. Arch enemies USA and Iran squared up to each other but it all fizzled out. Commentators are saying the market is in imminent dangerNOT. Retailers are in decline and partners in John Lewis may not get their bonus, but this is not making much difference.( Greggs staff, however, get a windfall ). Oil went up and er, back down again. BP hit its traditional £5 level and though I never trade it I always say that BP under a fiver is a trade to consider.

Marketwatch have this to say:

https://www.marketwatch.com/story/the-sp-500-is-now-more-overvalued-than-ever-per-this-measure-2020-01-08?mod=home-page

Share prices may well be creaking further aloft but interest rates are creeping lower. Bank of England may well cut if the pound stays strong and the economy looks wobbly. Nothing to see here…

Trade 161 Our Only Legacy Trade

Our calendar spread cost us 7.5 and we were left with a long 7100 Jan Put.

We could have sold 2×7000 puts at 6×2=12. Thus we’d have a credit* of 4! Or a butterfly 7200/7150/7100, giving a free trade. So we sell the two 7150 puts and buy the 7200 put.(9.5×2)-11= 8

Butterfly now: worthless, but the ratio spread while also worthless at least gave us that credit of 4*. Win/ not lose-you decide. CLOSED

Trade 162 When is a Jade Lizard* The Right Trade?

Short 7700/7750 call spread 36.5 and 20= 16.5, short 7550 put for 33. Giving us a total credit of 49.5. Thus our max risk to the upside only 0.5.

Now a cost of 23 to close- Biig win but we will also run this,for fun, to expiry aiming for max profit.

Trade 163 Forlorn Long Straddle

The market may(didn’t) react with increased volatility with global events. FTSE shrugged off the news,spat on it, and promptly kicked it to the kerb! So this is cheap relatively at 113, and I don’t think we’ll see 7735 or 7509 but a big one day move might see this worth 20% more. Made 116.5 on the Monday 6th. Closed out as a bad idea! We avoid losses more than we crave wins

Trade164 Rinse and Repeat…. almost

We are looking at a short iron butterfly. Say whaaaaat? Iron butterfly- you sell the straddle* buy the strangle**. Thus normally you’d sell the 7600 straddle and buy the 7500 put and 7700 call. We are doing the reverse. Prices- straddle 30.5+39=69.5 Strangle 4.5 and 10.5.= 15.  But you know what? 15 is rubbish- let’s sell 2 of those strangles. Now our cost is 69.5-30= 39.5.

Logic of the trade- we have risk at 7400 and 7800, theta is a help and the trade is now cheap at 39.5 with max possible 100. We’d take 60

*straddle- put and call at-the-money (normally sold)

**strangle- put and call out-of-the-money (normally sold)

We are looking a bit dour this week so here’s some cheer from Ralph Lauren:

We’re definitely going for this look in 2020.

Filed Under: FeaturedInformativeLearnStrategiesWeekly Trade Idea

Tags:

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

RSSComments (1)

Leave a Reply | Trackback URL

  1. Terrapin Trader says:

    Trade 162 looking AMAZING!!!! Who expected that? Cost of 6 to close giving a mahoosive 43.5. Next up our rinse and repeat Trade 164 now 52 – a tiny profit on 39.5 but hey 30% -the stuff of dreams for stock traders

Leave a Reply