Trade 94 Week Ending 24 August

The Week That Time forgot

Actually the whole of August has been pretty lame, for FTSE, though August 15th served us well with a 1.5% drop. August is the month when movers and shakers are away. The office cat is actually managing your funds! I like the ‘up day/down day‘ measure and August has 50% of each precisely. The US is hitting new highs, while FTSE is still around 2% below.  We note the USD has been particularly strong against the £sterling, which has helped keep FTSE aloft. We have a US/UK disconnect it seems.

The Charts Don’t Lie

Courtesy of Stockcharts-dollar strength has risen almost 10%, while sterling/dollar has dropped by that amount. These are key drivers of markets but ironically the US stock market shows no adverse effects of the strong dollar. Not ideal when your GDP increases (annualised for one quarter) to 4% but  total debt increases by 6.9% in the last year. Nations like debt to be inflated away and currency weakness is useful for that. We are used to currency weakness in the UK as the seeks parity with the £. Our deficit is shrinking, we are told.

Trade 93, You Ask? Look Back in Interest

Had we just gone in as a ratio trade it would now be worth 7, and we paid 3.5…but it’s early days, this has another 28 days to give us a real win. I don’t know if anyon’e noticed but sometimes I take a trade on the basis of a rising market, and the next week I do the opposite. Yet those trades are winners. I must, therefore, be a genius. Or…..the rational explanation…options give you so many ways to trade. Take a moment here…. imagine you are long, get stopped out, so you go short, and get stopped out. This is the reality for so many directional players. Soul crushing gut wrenching, sleep depriving anxiety. Never mind the battered ego and subsequent inability to take the trade. This idiot has NO such problems. Not because of any talent, or brains but due to the power of options.

Trade 94 Direction Direction Direction

Just for fun, we can have an opposing trade, and see where it leads as the market has less clue where it is going than I do. Here’s the plan: We are selling(Sept series) one 7750 call for 18.5 and buying the 7300 put for 18. I think  puts are relativey cheap, so we are trading a combination-knowns as a combo, or in the US a risk reversal. We need another August 15th, and we fast approach the 1st of a new month, with possible influx of dumb money. I would expect this trade to fail but it may surprise us. Options engineering or ‘Optionetics‘ as I learnt way back when allows us to adjust trades and mitigate losses. A 1% drop would be peachy and we only have 3 trading days.

The Options World

As oft repeated our mantra is ‘get people interested in options,give them insights and education’. Smart money wins every time. Dumb money is the one way bet, that means you have to be right more than 50% of the time, OR…. win at least 3 times what you lose. Oh yes, and be able to withstand 10 consecutive losers.(a statistical certainty). That is rare talent, and I doff my cap to those who have it, ‘cos it sure ain’t for me.

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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 94 now a very pleasant 18 to close out- that is £900 for 5 lots in 3 -4 days probably equates to about 30% return on capital, used as margin

  2. Terrapin Trader says:

    SMASHED IT!!!!!!!! 38 to close out in a week. Would you want to trade anything else?

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