Trade113 Week Ending 04Jan2019

Up 3% on the week- nobody saw that coming, but we don’t mind.Vol dropping massively,as you’d expect. Did I take advantage at 45DTE on Wednesday? Not saying-ok, I missed out! Grrrrrrr

New Year, Same Old Crazy

Here we are in 2019, and we are sure all our readers are not only solvent, but profitable. So we saw China trade talks and Non Farm Payrolls smash the short positions-as they do. Shorting is not for us retail traders we have the gift of puts. Want to get nasty on a stock? Buy a put strategy or if you are reckless,and like a gamble, buy naked puts. Yes, we will on occasion use ‘nakeds’ or semi-covered positions, but we do not sell naked without good reason. Random strangles kill! Outright options sellers blow up.

New Year Old Sauce

The audacity of brokers: Stock is loaned out to short sellers, by the brokers holding the stock. So, do they pay their clients for this privileged source of income? I’m sure you know the answer there. Same as banks leveraging our money, although that pays for the profligate whose defaults cost more than they know. We pay for some services gladly, however. Traders who expect to pay nothing for a service, get what they pay for, usually.

Catch Up and Trade 112(Not Our Trade,remember)

As recorded previously, the trades up to 111 have all been excellent. My decisions are not based on inate ability or superior intelligence, just a glance at prices, and a ‘nod’ to support and resistance.Trade 112 as you know was parallel to the Tasty Trader’s Iron Condor, with skewed risk. So how’s it doing? To open we saw a 33 credit it’s now about 27 to close. Of course it needs to run to expiry on Feb 15th. As always we will keep an eye and report anything exceptional, but it’s a bit of a dull strategy that just grinds out a daily profit.

Trade113 -something for a bonkers market

As options traders we plough a lonely furrow. We love the complexities, the nuances and the ‘game’ of trading. It may be as much art as it is science. I think it’s a trade,and hence I am known to the taxman as an options trader. Though I long ago abandoned trying to explain options to Her Majesty’s Revenue & Customs. As tedious but not as dangerous as explaining our trade in the pub, to the local barfly. So, what can we find?

 

Various ‘key’ levels

 

 

I have drawn levels which seem to correspond quite well at turning points. I am certainly no TA expert- you might want to buy Murphy’s Tome- THE definitive work. https://www.bookdepository.com/Technical-Analysis-of-the-Financial-Markets-Study-Guide-John-J.-Murphy/9780735200654?redirected=true&utm_medium=Google&utm_campaign=Base1&utm_source=UK&utm_content=Technical-Analysis-of-the-Financial-Markets-Study-Guide&selectCurrency=GBP&w=AFC7AU9SS695BVA8039X&pdg=aud-298410631902:pla-104399445939:kwd-104399445939:cmp-706833756:adg-43726231824:crv-162344087440:pid-9780735200654:dev-c&gclid=EAIaIQobChMI9quh6eLW3wIVxbHtCh0fCQDvEAQYAyABEgJGkPD_BwE

OK ok get to it! Alright already. Here’s what I fancy… A Call Ratio Spread. Not so simple to manage, but the short further OTM calls tend to lose value quickly towards expiry, giving additional credit. We are buying the Feb 6950 call and selling 2x 7000 calls for a credit of 26×2-40.5= 11.5. This was trading at 2.5 on thursday!

Logic of the trade: risk at 7050, no downside risk, but the area around 7000 might be met at expiry which could give us another payday-up to 50.In addition to the 11.5 credit. Should this go wrong, we can show adjustments, but I am highly suspicious of good numbers coming in after a big market drop. Just sayin’. You’d expect the $US to get a big boost too.

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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:

    trade113- take a quick profit today? Cost of 4 to close out -but nah, we’ll stick with it. Of course yo can always take half off-so a 10 lot would mean closing out 5 at 7.5 or £375 for about an hour’s work.

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