Trade 175 Week Ending 12 June Normal Has Left The Building

That Was The Week When BTFD got a Kick in the Pants

So, this week traders saw some semblance of ‘order’ and then Thursday happened. Happily for this trader! So why, oh why, is there such a disconnect? Economists tell us we had a 20%+ drop in economic activity, the market stayed aloft. Economists’ inflationary expectations have only been met in the stock market. The central bankers’ $trillions in largesse have found their way to Wall st, without seemingly, much of a nod to main st. Renters are anxious, mortgage holidays don’t last forever, there is much pain yet to hit.

Twitter users are blaming much of this ridiculous maket on the new breed of BTFD( buy the f****in’ dip) call buyers. Sellers of those calls run the risk of being ‘called away’ -ie having to provide the underlying stock, and some of this has hit dizzy heights. Tesla stock, I understand, hit $1,000 this week. Pundits rated it a buy at $480-so what now? 

This idiot might have taken a view that Tesla $600 calls would have been a safe ‘sell’ if asked a few weeks back. Spaceship charisma, possibly as Elon Musk’s Space-X became the coolest (though private) company on or off the planet. Such price hikes are a symptom of loose money -easy come easy go.

Random Trades- No More of That

We trade the index as we have stated many times, and those trades, last week, in Glencore and BP were just random. However -is there a way to gain an edge in picking stocks? Americans have smart platforms that can search under a staggering array of criteria for options and the underlying. We have 15 minute delayed prices, and that therefore keeps us on the path of modest gains and tiny losses. I picked one of many numerous email offers of a free webinar this week to look at a ‘retirement strategy’. Revelations were a bit thin on the ground but in effect, you have to pay a few hundred dollars to get share tips.

At no point did they mention they were call and put buyers.Trawling to a reviewer’s Youtube channel showed that. That is to their credit, but individual stock picking for short term gains is not this idiot’s cuppa tea. One-two tips a week – few will stick with that. https://youtu.be/J6tfTyvaSvs Of course there will be a run of several consecutive losers.

The world is waking up to options as a far far safer way of trading if you really must get directional. We remember however most of the time the market as a whole typically goes nowhere. You’d need to pick quite a few stocks and hope >50% of them made some money. This trader is not aware of a stop loss limit order that would be helpful for options, but perhaps in the US that works ok. Volatility at its current height would see violent moves in naked options, hence our use of strategies.

Legacy Trades- Smashing It- Nah but Doing Very Well

Trade 171

We sold the 5800 straddle(putcall) and BOUGHT the outer wings, the 5650put and 5950call. Horrible -now 144 on the call side and 3 on the puts -sold for total 134. Was a loser but don’t think we need worry about the puts, so we’d take a hit of 10. However, now 136.5 to close and we run to expiry for fun. 

Trade 172

We sold near month June 5600 put, buying July 5600 put but… we  also sold the July 5100 put. Debit 113.5-(49+58.5)= 6.   Last week the Jun 5600 put was 42, July 5600 put 96.5, the 5100 put was 40. So, the spread was worth 56.5, our liability for the Jun put was 42, so we had a credit of 14.5, but…we paid 6. We get 8.5! We run this. Now 9.5 -ugh! But wait!!! We now see this for 35.5  -We paid 6 remember? Peachy -Run to expiry

Trade 173

We went deeper with 5800 jun/july put calendar, and again selling 500 points below: the 5300 July put. The numbers thus: 139-56.5 for July spread= 82.5, minus the short Jun put at 71. This was a cheeky 11.5 debit. Now 14.5 -double ugh! However this has a turn around, it’s 38.5 now Peachy again -run to expiry

Trade174

Theta play- ‘something for the weekend’ lazy strangle- selling both the  6400 put  83.5 and the 6550 call also 83.5.

Why???? Some years ago another options trader suggested that theta works its magic over the weekend. Let’s see!

Prices on Monday 75.5(call) and 80.5 (put) = a profit of 167-156= 11   Don’t you hate it when the one example proves the rule? You would NOT have wanted to hold onto this!

Trade 175

Rinse and repeat!

FTSE chain Fri12jun2020

Let’s do the ‘theta weekend ‘ trade again with a strangle 5950 put 77.5 6200 call 74.5. This will not run for more than a day or two. Rewards… big. Risk unknowable but almost unlimited

Frankly there are currently SO many opportunities for calendars, butterflies, ratios etc this is an extraordinary time. High vol but heightened risk make this more of a lottery than a market.

 

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:

    Good grief!
    Yet again the trade holds up- put is now 70 despite the big drop at the open,and the call is 48. We took in 152 and this is now 118 to close -34 gain. though of course margin would have been hefty

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