Trade158 Week Ending 22November Still Winning

That was the Week -Some Helpful Action

We had another quick juicy win this week as the old crystal ball proves its worth. For the avoidance of doubt I have no idea where the market is headed. Traders should always understand there are way too many factors in play. We may have a vague notion of market sentiment, but that’s all*. Computing even without Qbits is sufficiently advanced to take account of most of those factors and yet we know they don’t perform so well. Thus our key to good trading as we consistently state: Manage risk, the wins will come if you keep size and costs manageable.

Picking trades

I’m reminded of how we all approach this so differently. Another trader who is yet to take a step into options, had not understood this until I explained. However, after so many trades over the years it just becomes obvious where there is fair value to be had. Free lunches? Never happens. Arbitrage? Not for retail traders -we’d need to up our size. Thus our process becomes almost automatic,however, when the prices align. So, when they don’t line up, we don’t trade.  Price Headley says https://www.bigtrends.com

“Sometimes you make more money just sitting on your hands”.

*For fun I note the up days and down days and know there is a skew towards up days. Currently we have 119 up 107 down. This creates a dilemma as it is not sufficiently skewed.

Don’t forget these excellent resources: https://21stcenturyinvestoreducation.com/page/tce/?sid=5047578068.1728540

And: https://www.tastytrade.com/tt/

 

To Business and Those Legacy Trades

Trade155

Our 7150 put calendar spread with a short We sell the Nov put and buy the Dec put 

We also sold 6950 Dec put for 41.5.

Our debit then 81.5-(24+41.5)=16. Max profit 7150-6950 put =200 after expiry!

Nov 8th’s  prices : 4.5 for Nov short put, 51.5 and 24.5 now 51.5-29=22.5, we paid 16 for this. 

Then Nov 15   7150 put is 0 Dec 7150 is 55.5, the 6950 25.5. We made (30-16) = 14.

We toyed with our almost free butterfly 7150/6950/6750, by selling the 6950/6750 spread for 12.5. (OK it costs 3.5)  That ‘fly is now 48 23(x2) 12 = 14 still winning  Close for 14 either way

Trade 157 Smashed IT Yet Again

We had long 7450 call 32.5, and short 7550 call 12.5 and… sold a 6700 put 11 effectively the reverse of last week’s trade. Our debit here: 32.5-(12.5+11)= 9. We have no upside risk only max profit 100. Downside we’re short >8% below today’s level

Tuesday and The Mandatory Comment

Terrapin Trader says:

Well- you could knock me down with a feather. Trade 157 SMASHED IT!!!!!
We paid 9 -remember?
We close out our 7450 call= 61, 7550call= 26, 6700 put= 7 Giving us 28- or 200%.
But we know better than to boast about our wins. This is about a modest trade, and the market giving us a peachy exit. Did we know the FTSE was going to have such a day? Of course not-we have no expectations we just like the odds in our favour, our costs low, and our risk super manageable. This trade needed some margin so the 200% is kind of academic-but be honest what else would you be doing with your cash?

Trade158

So, the obvious trade the long 7450 /7550 call spread (37.5-14)=23.5  financed by the sale of 6950 put(23). Tiny debit 0.5  

Safety traders: Call butterfly 7350/7450/7550 81.5 (37.5×2) 14= Debit 20.5. Would you sell a put to finance it?

Take a look:

Remember puts on the right- you could sell a spread-or even a ratio spread to finance that butterfly……..

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:

    How did we do with Trade 158? 57.5-22.5= 35 minus 13.5 = 21.5
    Another fantastic winner-because options strategies work. With 5 contracts you’d have £1k in your bin by end of day- a managed risk trade- had it gone the other way, we’d have some juice left in the calls to buy put protection- but we don’t get to see that.
    The butterfly as you’d expect -indifferent now 21- a bit rubbish really, though if you’d sold a put to finance it? Peachy.

    • Terrapin Trader says:

      It’s 25 now but that butterfly? 22 but if you’d sold a dip OTM put to part finance it, then it would have been an ok trade too. My own approach is basically never pay a lot for anything -options should be like LIDL!

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