Trade 42 and an Apology

Here’s a Combo (Didn’t see that coming?)

Trade 42 …Combo! Risk Reversal

Here’s the trade,  August expiries: Sell 7550 call for 13, thence buy the 7350 put for 14. Debit of 1. Risk- unlimited. Look, therefore, to take a quick reward.

Reasons For The Trade

I have a soft spot for quirky statistics- in fact I have used this many times. Not always successfully, I might add. It is simply the up day/down day count. The premise for this is simple. In any trading year the number of trading days that are positive =51%. This may mean almost nothing in the early months of the new year though. A simple count thus reveals the stats-we have had too many up days. I also see a pattern of 2 up days resulting in price rejection.

Risk is Unlimited?

Theoretically the FTSE  could  go to the Moon. It is possible to look at a variety of adjustments-I’ll try to keep up. There is thus, some mitigation with these.

That Apology- Trade 41

I took a seriously under considered position last week with a broken wing butterfly. I have been unwell, and continue to suffer. There is nothing wrong with having a horrible losing trade from time to time. I will try to ensure there is an acceptable outcome limiting losses. Hang on in there-this is where we all learn.

Filed Under: Weekly 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

RSSComments (4)

Leave a Reply | Trackback URL

  1. Terrapin Trader says:

    Combo combo combo combo…. thank you very much
    today the call was trading at 6, and the put at 19. A very respectable 13.
    Of course the dumb money kept piling in until it didn’t.
    I’m still looking for a smart way out of trade 41- the ill chosen call broken wing butterfly.

    • Terrapin Trader says:

      OK- now we have some sensible prices this combo is worth about 25. the 7550 call=2, the 7350 put 27. Smashed it out of the park, I’d say

  2. Terrapin Trader says:

    comment on Trade 41 has been added though it mysteriosuly disappeared from earlier. I may be going nuts!

  3. zxcv64 says:

    This is a risk-reversal. It would be nice to give some margin required calcs – the %age profit is not simply 27/1 = 2700%, but instead it would be (27/whatever-the-margin-was) * 100.

    Love the website TP, and the trades.

Leave a Reply