Trade 170 Week Ending 21 February

That Was The Week FTSE Dipped Toes, and Shrank Back From the Water’s Edge

No dives this week. Those awful puns just keep coming! Our financial news is so confusing with so much ‘good’. Yet AAPL and Nasdaq taking a 2%+ hit as COVID-19 takes its toll on production in China. We know of UK companies who have manufacturing in that region of China. Railing against the markets recently I used the word ‘arrogant’. Central banks are piling in to support markets, so perhaps careless would be a more apt term. Careless in the respect of not actually caring about paying back the staggering sums borrowed from the future. A friend once suggested the theme for a musical where the youth rise up against tyrannical elders. Somewhat prescient? Who could blame them, when us doddery older folk have enjoyed the best times at the punchbowl. Perhaps Extinction Rebellion is more of a movement to get rid of profligate old people!

 Time To Update, Time To Rationalise

This trader became aware that the Mac* was having one or two issues. My first big trading mistake was to buy iMac, but I persisted! My 2012 Mac Mini’s software needed to be updated and old files moved to the cloud. Old junk, and many pictures made the leap into the cloud seamlessly. This hit a note or even a ‘discord’, that we have difficulties updating to the changing nature of the market. Personally, I feel that it takes about a month to adapt to the market dynamic. Van Tharp,  who most graciously sends me free regular emails, talks about the market condition. Much of his good stuff is free.  Thus I would urge anyone to look at all and any education and decide what suits. However Van, for me, has been a terrific help as market pyschology does play a part. Nobody is immune to feelings

*Nothing used to work on Mac-all trading platforms were PC based.

Taking Stock ( We Hate Stocks)

Index trading has a clear advantage as our options are European style( no risk of early exercise or assignment). Also, index trading divorces the trader from any personal weighting, like falling in love with a stock, as people do. Thus we can trade with cold logic, and take profits without emotion- mostly. The staggering success of trades here has little do do with great selection, but everything to do with options mindset. So we are more akin to quantum physicists than mathematicians. If both subjects were taught in Mister Men books!

Legacy Trades and Trade 170 – A New Month, So Many Choices

Trade 169  made 59.5 (cost 27) at expiry,so profit 22.5 Margin required of course, but a huge win.

Trade170 Butterfly 

In light of the current unknowns it’s prudent to play safe and what better trade than a butterfly? Bulletproof with great profit potential. We again opt for Puts– with the following strikes and prices.

7300 81.5, 7200 -54, 7100 -36.5.

So- we buy the 7300, sell two of the 7200s and we buy the bullet proofing 7100

Why? You ask. The costs is 81.5+36.5= 118 minus the credit we get from selling the 7200puts at 54×2= 108.                  So, 118-108 is………… 10. That is our maximum risk, our maximum profit 100-10= 90( the difference between 7300and 7200 minus our cost 10). Logic of the trade? The 7200-7300 area could be the next stepdown for FTSE.

We are ……………… directional- sort of. However we’d take anything above 20, as the journey can be where the easier money is, as opposed to waiting for expiry.

And This…………………………………….. High Praise Indeed!





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:

    We lose trade 170 as the world appears to be in deep trouble with COVID-19. Of course this trader took a hit withown account but had to close out- we may have to suspend our weekly trade ideas as the stockmarket is no longer the place to be, and trading even deep out of the money as I do has been a disaster. Out-of-the-money may not be a term with the market tanking- even 500 points below looks risky.

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