Trade149 Week ending Friday 13th

That Was The Week

FTSE up about 1.17% on reasonable volume, volatility off the proverbial cliff, sort of. Sterling had a big rally so it’s a surprise to see FTSE also gaining. Faith in the UK is undiminished despite the dim antics as Parliament finished. (See what I did there?) Traders will doubtless have been setting up Oct positions thinking ‘it’s not as bad as they all make out’ and ‘Brexit? Never happen’. However we view our glorious leaders I think we’re all agreed as Jeremy Paxman says they are all CRAP! Easy to point fingers, but which of us could do better? I digress, this is an options site, but we do like a pun.

Seasonality

What can we glean from the past? While there are some scholarly articles on market behaviour, there is no evidence to suggest a clear bias to the upside from September. The month allegedly has the worst returns. We have a butterfly that was positioned for this. Thus folly has its own reward. Time and again I am reminded that we trade relationships. Between different options. The underlying. The certain events- non-farms, interest rates. And a vague notion of market range. So, for us direction is of limited interest.That sounds dumb, right? We’d say ‘ show me the money’. Our track record here is based on the dimmest market analysis. Thus, if there is a strength, it is in having a head for the numbers-and we do like numbers.

Spreadbet platforms are obliged to state that something like 74% of traders lose money with CFDs. You have to wonder if the 26% actually make a profit or simply do not lose their shirt. Another interesting stat this week came from the awesome Tasty Trade https://www.tastytrade.com/tt/shows/market-measures

Take a few minutes to check this out- I think it is valuable research-and I would say if this is such a losing strategy, why not take the other side of the trade? With careful analysis and trade management, would you?

 

 

Those Legacy Trades

TRADE 146

Owners we are, of a put Butterfly buy (Sept) 7000( 86)/ sell 6900(63×2) / buy 6800(46.5).   86+46.5 – (63×2) =6.5 Debit

Therefore, risk limited to premium paid, 6.5 max reward 93.5 ………we’d take 25. Last week worth  2– now ? Let it go

 

Trade148 Combo Lizard Thing!

So, this is directional(ugh!) but also takes advantage of theta, though there is a whiff of danger. The trade is an expectation of FTSE staying at least below 7400, and ideally around 7100-7200.

Sell 7400 Call  14    Buy 7200 put 31   7100 put 15  DEBIT (31-15) -14= 2

Now  call25.5  puts= 5.5 – 2.5- looking decidedly ugly. Should we get into trouble with the call, we will look to roll into Oct.

And Then….Trade 149- Tasty Research Be Damned, Playing Devil’s Avocado

7350 straddle 80.5 selling the call 53 and put 27.5

This is a fun trade and if one example is not of statistical relevance, we’ll take that on board. This trade makes money at >7430 and <7270. But if vol spikes up we could see a quick 5-10% return. We need a wild swing either way-can Boris help us out?

 

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:

    LOL! Trade 149- already lost 10, or 12.5%. But would you sell so near to expiry?

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