Trade 99! Week Ending 28September

The Week’s Activity

Again at the end of the week, the rise after Monday’s open is negated pretty much. VFTSE picked up a little on Friday. Politics grabs the headlines, but typically it is nothing that bothers us, and the markets have seen it all before. That is not to belittle Dr.Ford’s experience – but  that is for another place, not here.  Is 7450-7620 the new range? A Recent chart shows that this looks like the picture to me-but what do I know? 7550 seems to have been rejected, upside may be…. oh, who knows?

October and Those Omens

We are often told of the October effect and consequent looming disaster- what’s the truth?  https://www.investopedia.com/terms/o/octobereffect.asp

Seasonality,and Reliability

Personally I don’t pin too much faith in these supposed effects. I read once that some people have traded successfully using the phases of the Moon. Good luck to them if they have found something that works for them. Maybe we’re all missing a trick. The point is that we all get caught out but if we have a strategy, a plan we should not get blown up. Thus options can ensure we have limited risk, or at least a chance to adjust. We are never binary win/lose.  However, a shorter essay this week, lacking inspiration from the FTSE. So let’s get down to business:

Catch Up

Trade 98 We paid  23  for this (October)put Condor buying the 7450 put selling the 7350,and the 7250 and buying the 7150. It makes money between 7450-23 and 7150+23, so 7427 and 7173 are our limits. Currently it’s worth about 19, these do not suddenly make money, it’s a slow burn.Patience dear boy, patience.

Trade 99- Turning a Trade On Its Head

Keen observers may have noticed a curious trade that I have used in the past(3×2 calendar ratio) and I have pointed out this is not mine. I claim no glory, it belongs to an esoteric Indian guy who lives in the US and started with $8.  So…..what if we inverted this trade and as in a normal calendar spread, we sold the front month and bought the far month? Thus the position currently would be to sell the Oct 7500 straddle x3 and BUY the Nov 7500 straddle x2. Why on earth would we do that?……………………. Theta.

Trade 99 the nuts and bolts

The Oct 7500 straddle- calls 81.5, puts 69.5,add them up and x3= 453. Now, the Nov 7500 straddle. Calls are 116.5 and puts are 125. Add ’em up and x2= 483. We are thus paying 483-453= 30 for this trade. So, we are in that window where theta gets big for the near month, but we are disregarding other factors,such as vega,and as we own only 2 straddles and sold 3. We have delta exposure too. Will it come back to bite us?

PS Couldn’t resist the ice cream pic, from a time long ago when 3d was 1/80th of a pound!

 

 

 

Filed Under: FeaturedInformativeLearnStrategiesWeekly 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:

    Trade99 would have scored 40, on a debit of 30. A share trader might wait a year for a 33% return- would we take that? It’s a quirky trade and the FTSE may well be headed south again,and any move >100 makes the front month more valuable. currently the position is flat again at 30 to close out.

  2. Terrapin Trader says:

    Trade 99, we paid 30, it’s now 51. Should anyone know of a stock that can do this-please let me know and I’ll give you ten grand for it. Yet again, options smash it out of the park, yet the dullards, the dismal and the dreamers think forex or stocks will make their fortune. Jog on losers, we only win here!

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