Trade 87 A Doofer? A Fiver? Nah- a Threefer

Meanwhile back at the Factory……..

Trade 86-remember? Course not. Here it is: We are selling 2July 7100 puts(14×2=28), buying 1 August7100 put for 30. We are selling 2 July 7800 calls( 23.5×2=47) And buying 1August 7800 call for 48.5 So, this is a debit trade, therefore at a cost of (30-28)+ (48.5-47)= 2+1.5.=3.5

Here is where we are at close of play on Friday : July 7100 puts are 4(x2) =8. July 7800 calls are 9.5(x2)= 19. August 7100puts 23,Aug 7800calls 25=48.Minus (8+19) gives us 21. We can hold on for more profit or close out for a very sweet (21-3.5) 17.5. In old money that is £1,750 for 10 ‘strategies’. Actually 60 lots – as you’d be selling 20 puts,selling 20 calls and buying 10 puts and 10 calls.

Yes, but Options, (sucks in air between teeth) It’s Risky innit?

Firstly no. Secondly NO, Thirdly what we do is look at the risk and learn to manage it. Thus we do not get up at 05:00am, and start having palpitations as the Vietnamese Dong swoons against the €. Chart watching? About an hour max. Therefore risk to health compared to Forex, futures or any dirctional trading. We are not even in,or venturing near that postcode! We are chilled, well researched, risk managers.

Here’s Trade 87

It’s a 3×1. A Whaaaaat? I hear you say.

So here’s the thing. A regular ratio trade in broker parlance is a toofer, or a one by two. But, in this instance we are doing a threefer(in my parlance). We are looking to sell 3 options and buy 1. But this sounds risky, right? Check out the chart- FTSE is stumbling around here with support at 7500. The dumb money can pile in at any time and take us up to the peak again. Seriously, though, we do not care, as we are trading puts. Our risk is at 7330-almost 300 points or 4% below today’s level. We are buying (ouch- I know, we hate to buy!) 1 (one) 7550 put paying 44(Lewis Hamilton’s number) we are SELLING, get this… 3 that’s three of the 7400 puts for 16.5 each= 49.5. A credit of 5.5 but that is really not the point.

Get TO The Point,Then!

Theta works big in our favour, the market, barring any crazy tariffs or tantrums will likely do little, but if it drops to anywhere near 7400,we are very very happy bunnies-we could make another 150. Still wishing you hadn’t just sold naked now?

Filed Under: InformativeStrategiesWeekly 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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