Trade 67- Where To Now, Sherlock?

Reading The Signs, Finding the Trade

Here’s a naked chart of FTSE. So what can we read into it? But before that- are there are skeptics out there who dislike charts? I railed against their use for years as I’m not good with visuals, and prefer numbers. To say I failed at art at school is a mild understatement. ‘Catastrophic’ is more in line with describing my artistic ability.

Support and Resistance?

We can see that where we are now is in line with the last level of support. Should we rise through this we might consider we are not at resistance. I am however, obliged to make a choice here with the given prices-as our site is devoted to real world prices, real world outcomes. I’m going to say we are at resistance, volumes were a little thin on these up days. However we are in balance with up days versus down days.(51% of trading days used to be up days-make of that what you will).

Let’s Place That Trade

And I choose a limited risk debit trade………..Condor! Thus we need to be clear about the strategy and as usual I’m choosing puts. For demonstration purposes. Calls are just as useful. We buy the first strike and the last strike(the wings) and sell the body-the two middle strikes. Therefore,our max profit is 100 our risk is limited to the debit paid.

1.Put condor strikes and prices :7400 (173.5) 7300 (112 ) 7200 (70.5)7100 (44.5) debit: 35.5

2.Put condor strikes and prices :7350     (140) 7250  (89)  7150 (56)     7050 (36)    debit:31

3.Call condor strikes and prices :7300    ( 71)  7400(32.5) 7500 (13)      7600 (4.5) debit:20

The Logic and Outcomes

So, if we like the market down below 7400 we go for number 1, below 7350, number 2,if we prefer above 7300 we go for 3. I have no idea where we are headed but we need to limit risk in these uncertain times, after months of certain times, which have crushed the ‘dumb money’. As always, love the journey, never stop learning.

Filed Under: StrategiesWeekly 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:

    Currently the put condors are showing about 50% profit- the call condor? 40% loss.
    Would you take 2 or more of these? You might end up making your broker rich while you tread water

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