Trade166 Week Ending 24Jan2020

That Was The Week- Some Movement and a VIX Pop

Volatility, sadly, is not reflected in UK options with  .30 delta put trading at 12% vol. during Thursday’s plummet. So what’s going on? Massive open interest for the 7800 call. We are all a bit tame elsewhere for February expiry. Global medical scares in the past have made no impact on markets,and why should they, given the prospect of big spending? So Davos, Brexit, impeachment,Labour’s travails, all a big nothing. However some alarmist stuff on Twitter:

Brandy in utter turmoil!

And this-

So -this is curious and maybe this trader knows something……….

Webinars- Are They Worth The Time?

Self confessed education addict that I am, I enjoy online courses and generally try to keep up with webinars from such luminaries as Saxobank,  CME, Jim Mellon, and a fair chunk of free education on YouTube. However this week I was greatly disappointed by a webinar whose aim was to sell an algo. The premise was, that if enough traders could prove its worth, the webinarist could get millions in funds to trade. The numbers show irrefutable proof that my strategy would have made 200% last year when using 100% of margin. I cannot even get the price of a Double Decaff Skinny MochaFrappucino. My margin, when trading is under utilised by 75% typically. Fear of success is as real as fear of failure. But show me the money- I’ll happily go nuts with other people’s cash!(Kidding)

Preparation For The ‘B’ Word

Just a reminder that markets may swing wildly this week and by next week’s missive we will have left the EU. People who trade news or events have my admiration- it’s really not for me. Risk management is everything, which brings us roundly to:

The Sole Legacy Trade

Trade165 – we could only choose February expiry

So, we sold a call spread- we sold the 7700 (62) and bought the 7750 (41.5).  Thus our risk was above 7770 as we took in a chunky credit of: (62-41.5)=20.5. Thus the most we could lose was 29.5 (50, the width of the strikes minus credit taken in).

Peachy! Closed for 7 on Thursday  13.5 (£135 on margin of maybe £2k= 6.7% in a week) Winner.

Trade166 An Old Chestnut Revisited

While I hate to sell puts in a low vol environment, having a wider spread* can mitigate potential losses, lower costs with a ratio*, and increase profits. This is a bit ‘out there’ and readers should check out Tasty Trade’s work on ratio spreads. The stats are amazing. Now you’ve been spoonfed enough- figure it out for yourselves:

Where is your risk area? What is your cost? How would you deal with a big drop? Where would you exit?

*the clues are here


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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