Trade154 Week Ending 25 October

 

That Was The Week  Up 3%. While England Rugby Team Smite The Dark Lords

Traders and Brexit watchers seem delighted with this week’s mayhem. So, kicking the can along the road is the number one game in town, yet again. How many times have we all thought, ‘I’ll hang on until the vote’. Thus missing great trades. Well, we soldier on and  witness there is no material ill effect on the market. Same in the US- Impeachment, trade wars,real wars, no problem. MSFT is doing great-not on my PCs it ain’t!

Vix- down down down

I read a Tweet this week declaring that we are waaaaay oversold both puts and calls and prices are thus depressed. We say that’s ok, we will reap the profits from those who choose to fly too close to the sun. Traders like us bide our time, and make quality trades. Traders(deluded)  selling naked premium think they are  genius. Good for them, may they bask in the warm glow.

Our research chums at Tasty Trade are featured here  https://luckboxmagazine.com/techniques/short-volatility/?utm_source=newsletter&utm_medium=email&utm_campaign=245&mc_cid=a2516f6525&mc_eid=2ff84cd4d2

Meanwhile in Crazy Town BTC

https://uk.investing.com/news/cryptocurrency-news/bitcoin-rally-pauses-at-10500-still-up-25-1985881

President Ji of China allegedly said something that may be construed as supporting blockchain. Options traders like us would  have been long call spreads every month this year. Nimble traders would still need cast iron constitutions -it’s already dumped by almost 1300.

 

Those Legacy Trades and 154

Our trade 150 How did the adjustment do? Butterfly is of course 7250/7150/7050(160,106.5×2,69.5)=229.5-213=16.5We are short some 6800 puts though….. 24×2= 48. We’d be underwater for 28, remember we have a credit of 3.5 from the adjustment, hence 48 – (16.5+3.5)=28debit. Credit 12  for the butterfly  short puts are 4×2=8  so still ugly –losing (28-4)= 24,but not a catastrophe. More time….

Trade 153 Long put spread 7000/6900 ( 56-36.5)= 19.5 We bought the 7000 put and sold the 6900. You say ‘that’s a bit pricey’-ok, so let’s be a little cheeky and sell a 6750 put for 20. We now have a tiny credit of a halfpenny, but we are short at 6750 though we own the spread far above it.

We note those prices now 7000 put=11, 6900 put=6.5, short 6750 put 3.5. so we have 11-6.5= 4.5-3.5=1 . Chill, we have a few weeks to go…

Trade154

On my chart 7422, – it looks like quite strong resistance yet the pathway seems upwards. Speculator that I am on levels, I think we can get short at 7450, but long below it. You ask how? 7400 @28.5 7450 @ 15.5 or 7500 @8

Picking the bones out of these strikes and prices we can construct a long 7400/7450 spread, and sell above it. Personally I favour a ratio spread –selling 2 of the 7450calls for each long 7400call. Thus we collect (15,5×2)-28.5= Credit 2.5 You could opt for long 7400/7450 spread and sell the 7500 at 8, giving a Debit trade of (28.5-15.5) -8= Debit

Parliament do your worst!

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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