Trade 88 Playing Not To Lose

Trade 87-So We Win Tiny, There’s Still Hope

Trade 87-from last week:We were buying  1 (one) 7550 put paying 44(Lewis Hamilton’s number) and 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. Sorry for Lewis Hamilton too!

Biiiig disappointment as the market refused to dip- the 7550s are now 9.5, the 7400s are 3. We could close out for nothing,here or wait for expiry which costs nothing as options are ‘abandoned’.

When You Want To Trade But There’s nothing Out There

I read this book some years ago: Play To Win! by two people named Wilson. There was much made of playing ‘not to lose’. Sometimes this is the position I take with trading. Currently there is a bleak landscape as the vol has yet again been sucked out of the market. My entries for August were delayed somewhat and the delicious peak in vol a couple of weeks back, just vanished. I cannot countenance selling a lot of premium as the risk/reward makes no sense currently. But I still want some skin in the game. Remember, August can be a freaky wild ride(check out 2015).

What’s Wrong With Playing Not To Lose?

So, as traders we are here to win, to pay the rent, buy strange exotic Gin and have a life of freedom. By not winning we are participants in name only. This week’s trade takes that position- an unlikely win, highly improbable loser. We are buying a put spread,and paying for it by selling more puts. Thus we have a sort of Xmas tree. We choose to buy the 7400/7250 Aug put spreads and sell an equal amount of 7200 puts. (35-19.5=15.5,minus 16.5 credit= 1)

Thus we have a tiny credit of 1 and a position whose long side is just inside one standard deviation. Remember .16 delta = one standard deviation. So, if it is unlikely to win, what is the point? The long 7400 may be of great use later on in the expiry cycle, and we are burning short premium. Theta is our friend.

Anyone figured out where we have risk?………..








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:

    trade 88- looking back it made a tiny profit but it was a safe trade,keeping some skin in the game. Idle cash makes no interest,so we beat the market

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