Week Ending 03 April

That Was The Week

You’d have to applaud the powers that be as the market has not gone into total meltdown. So, does that mean they have priced in the risk? No. Nobody can make a market other than by putting out hugely wide spreads and seeing who bites. And yet-volumes have ramped up since the end February. However, spreads seem to be narrowing. This is not tempting currently-we could easily see a 20% drop in a few days. It is not clear why the market has chosen support at around 5400, and maybe this will hold for now. For the wider economy let’s hope so. Nobody wants to see their pension pot lose 30%.

Anecdotes From This Week

Twitter feed had an interesting confession(highly unusual) from a US trader. He had bought $50 VIX calls for $5,and closed out for $0.17 in February. So then, they hit >$20 of course. So, what’s wrong with this? Well it’s a rookie error in so many ways. Directional, near month,naked, long calls. This was a ‘hail mary’ trade. You could do these month after month and burn cash. The one time you get lucky simply pays for the first 6 months. Rinse and repeat.

There are ‘pro’ traders who by sheer luck manage to get things right, for a long time. However that is so far removed from what we do. Thus,trading modestly, within our means, taking a considered approach is what works repeatedly over time. Therefore we have zero risk of ruin, and do not have to play catch up for repeatedly losing money. So don’t be that guy!



Legacy Trades


Paid 14 for the 5000/4800/4600 PUT butterfly – now 131/89.5×2/59.5= 11.5

Currently 9.5 


 PUT butterfly 5250 203  5000 131(x2) 4750 81. Debit 284-262=22

Currently 27

A look at the call side too…… 5600 242 5800 156(x2)  6000 92.5  334.5- 312= 22.5

Currently 29

Our iron butterfly at 5500   5600 call 242, 5500 call 293  5500 put 303, 5400 put 259.5.   94.5 credit 

Currently 88

Zero. 0.4

Cash! So,let’s see how our current trades hold up. There are enough to satisfy the modest trader- with two put ‘flies, one call ‘fly and an iron ‘fly.


April 4900/4750 calendar put spread 37.5-24=13.5 May 4900/4750 put spread  129-100=29

Sell April buy May costs us  29-13.5=15.5

It’s just for fun- don’t like it but assume the April spread goes out for nothing, the May spread should at least cover our costs.

And finally this:

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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