Trade97 Week Ending 14 September

That Was The Week

A bit of a nothing but it didn’t feel like it as the FTSE dropped beneath the waves with a low of 7220. I have several positions running into this expiry,and confess to failing to take the 45DTE (Oct expiry trade) That came into view on 7th Sept. Of course this is RTS– rubbish trader syndrome. When all the evidence stacks up and your reasons for the trade have ticked all the boxes, just do it. So… how did we do last week?

Trade96, Not Such a Great Trade

Trade 96 we bought the 7400/ 7450 long call spread. Prices 22.5 and 12.5 so we pay 22.5 for the 7400 call,and sell the 7450 call for 12.5 giving us a debit of 10. It hit 11 during the week! Now it’s 7,so what’s to do? Well we could sell the 7400 call for 11, and take a chance on the naked 7450 call. I’d be inclined to wait for the Monday open, and the market might give us a blip up. Losing 3 on this trade though would be, ‘the rent on the shop’. We need to take the losers in our stride, and perhaps revisit the reasons for the trade.

Links- Not The Juvenile Body Spray Either!

First up- this from the mighty Bloomberg. I guess it’s genuine,and it suggests a very big player fancies the VIX to get big in November or before. Vix has been dropping as has VFTSE. This may be a wildly speculative play from a ‘fat wallet’.  However it’s a good read.

Big old Vix trade: https://www.bloombergquint.com/markets/2018/09/13/vix-options-volume-soars-as-someone-bets-big-on-volatility-spike

The Polar Opposite of This site

It’s all about the links: https://www.thisismoney.co.uk/money/investing/article-6050545/Exposed-trading-courses-peddle-expensive-pipe-dream.html

Now these are thoroughly ‘nice’ people and I have no view, I think paying to learn is ok,and each to their own. But……. with a terrible conversion rate from punter to trader, this does not seem to be going well. I reckon there is, seemingly, an endless supply of dreamers who make little effort. I am reminded of my musical days when so many talents remained hidden as they didn’t put themselves out there. They didn’t want to take the risk. They wanted a miracle to walk into their front room and change their life. That only happens to Ozzy Osborne! The rest of us have to buckle up, put in the hard yards, take the knocks, look over the parapet,and all the other cliches. Of course Ozzie did that too!

Which Brings Us To…..Trade 97

I will simplify and justify this trade.  We are selling a call and a put in Sept, and buying a call and put in October. But it’s not that simple. We are selling 3 of each against one of each that we buy. This is a time spread, or a calendar spread as it is better known. It’s also known as a diagonal! confused? Stick with it. We sell 3×7150 Sept puts @7= 21. We buy the 7100 Oct put @41. Cost, therefore is 20. We are selling 3x 7400 calls@11×3=33  and buying one Oct 7450  call @  37, gives us a debit of 4.

Total debit therefore 20+4=24 

Logic of The Trade

Why? 7450 got rejected and FTSE tumbled to a low as previously mentioned of 7220. Only one side of this can go ‘in the money’ of course,and with an overall cost of 24 and a downside bias I think we could see, on Friday after the 10:00am auction that we have free and clear, a short strangle (long both sides in effect). That might be valued at about 60-65, given a bit of theta. Should it fail, we will look at adjusting, something I really want to demonstrate.

Expiry Week

Time to be careful with all positions, and typically there is much movement in options on the Thursday. I’ll keep folk posted about progress with running trades, but I think for now 97 is it. Just one last thing…. FTSE options now trade until 4:50,while FTSE settlement is at 4:30, so trades left hanging might get taken at bad prices- please be aware. I get emails from ICE.com but do not recall this little gem.

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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:

    WINNER YET AGAIN!!!!! ok those Sept options – the puts 4.5, the calls 4, so that’s 13.5+12=25.5, the Oct put39.5, the call 31= 70.5,take away 25.5= 45. That has almost doubled our money in just 2 days. Paid 24 remember? Let’s see where we are tomorrow-but you could take that to the bank and have a day off.
    These numbers amended after dodgy settlement figures

  2. Terrapin Trader says:

    jus trading 5 lots here would give you £1,000 profit in a couple of days but remember this can be rinse and repeat every month.You now have an income for life

  3. Terrapin Trader says:

    OK-even better if you’d closed out the shorts- the Oct options are now worth 80,as the FTSe for no good reason has smashed up. Now…if you’d held on to those short 7400s they’d be worht about 30 apiece x3= 90, the long call and the long put are about 80. How would you adjust? So many ways…to be explored

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