Trade 91 A Triple Twist and Week Ending 03 August

New Format

So I have decided to roll weekly observations and the trade of the week into one post. I think most of you good people like the trades,and are not so bothered about my inane ramblings. (Chorus of no, no, we love all the content!) I hope that people are continuing to pick up on how options work from the pared down approach. When I look at sites like https://www.elitetrader.com/et/

It saddens me somewhat that people are sniping at each other, and some folk seem very far from understanding what they are doing. Being a newbie is not an issue -we all started somewhere. I still consider myself a learner. Rookie mistakes show up here sometimes, but the aim is to make  crystal clear what is going on. Either with opinions, or links to interesting stuff, or with trades where we are totally open about how it is entered and (mostly) exited. So, here we go with the week and the trade. First up,the trade.

Options Chain for September

Read on below….

 

 

Why Open Interest Is Important and Why It’sMisleading

I have, in my inept way with computer graphics, underlined various levels in the open interest columns. These appear to be where the most activity is,but not necessarily where the long positions are. So what are they saying? It’s good to have a think about why those levels are significant, but we cannot know the trades. They typically are related to other strikes or other months.(Like the work we do- my trades are in there too).  Knock yourself out and check out other expiries and see if you can make a connection.

Trade 91 Getting Feisty in the Remaining DTE

Trade 91 A Triple Twister

This is a calendar trade-or time spread, with a difference. We are using the ratio of selling 3 aug 7300 puts to buy 1 Sept. A bit riskier than usual, but do the math:36.5 – (7.5×3)=14 debit.

Delta 0.0351 Gamma 9 against us Theta 2.716 in our favour, Vega 1.3003   -See I did it for you. We are delta neutral, gamma is a bit chunky against us, theta massively in our favour and vega? Positive for us. I don’t like debit trades but this level, 7300 has piqued my interest. PS Trade 90? I traded in and out of the 7700/7800 call spread as the market dipped. Buying at 9.5 and selling back where we were at 17. cheers!

Meanwhile:

 

Anyone see a repeating pattern of going nowhereness? We are in a tight range,which can stay the same, go up, or go down. With options we let the market decide, being positioned for a move either way. Have a great week, watch out for trades 89 and 90 nearing expiry- I’m not so confident now, but we survived the risible rise in interest rates. Caveat – I have a fun put trade, that could make ££££ too.

Filed Under: InformativeWeekly 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:

    to be updated

  2. Terrapin Trader says:

    Killer trade- th Sep puts are now 38 with the Aug ones 0.5 x3= 36.5 from an outlay of 14 plus a bit of margin. That’s got to be around 10% ROCE. We like these as the success rate is so high

  3. Terrapin Trader says:

    This was a Monster- making as much as >50 a month’s income in one trade.

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