That Was The Week Big Vol Spike, As You Were
FTSE gave us a nice vol spike on Wednesday which is most welcome as it makes little sense to be nett short when vol is so low. VIX had been hovering around 16 in April/ early May. However we stick to our promise and place our trade using end of day prices from Friday. So, one might expect being hobbled in such a way would be detrimental. Yet our no BS, no cherry picking, trading record stands. Thus proving options to be far and away the optimum vehicle for making money. Despite the warnings folk still chase the dream with CFDs Forex etc. However, this idiot decided to look at a bias for Fridays,and you know what? I found that out of the last 48 Fridays only 10 (TEN) showed an increase in vol and most of those were modest. Which brings us neatly to:
You can read this in a couple of minutes, but our readers are smart cookies and understand the effect of vol on pricing. It’s common sense. The bigger the risk the greater the premiums. Hence buying calls when the market has tanked and the vol is huge is a killer.
Anyone struggling here might find this a helpful refresher- challenge us with your new found knowledge if you’re a newbie:
Distraction Rant
I may have previously mentioned a simple cheap and smart share trading platform that I use. https://brokerchooser.com/broker-reviews/degiro-review
So you don’t need to take my word for it -but the FCA disclaimer is interesting.
However, what really grinds my gears, is the rotten lousy options data we get in the UK. I looked at shares in MAN Group on Degiro. There were………………………….. 79 data points. Ice.com gives us 7 data points and 6 of these are prices. Should you ever want solid evidence that the City hates us taking money from the market, this is the smoking gun. Thankfully our American cousins give us: https://www.cmegroup.com/tools-information/quikstrike/options-calculator.html?utm_source=LINKEDIN_COMPANY
We do use their graphical calculator from time to time in our trade of the week. US platforms give you a cornucopia of useful data,and we can trade the US.
Distraction Trades
Yet again the DAX rewarded us with 300 + points with one quirky break even. How is DOGEGBP? After Elon went on Saturday Night Live, cryptos seemed to ge a bit flakey. I’m a great admirer of the man and all his endeavours. However, you have to question the business model that has only ever made a profit, not from its core businesses, but with Bitcoin. So it is alleged. Thus this old dog is sidelined. Now, DOGEGBP is 0.244 . However, it still irks that I wanted to buy at £0.038
Legacy Trades, Closed At /Before Expiry
Trade 216 Risk/Reward is Now A poor Prospect (Apr 16th)
Our starting position was a long straddle: 7050 call 65.5, 7050 put 129.5.
19/20 Apr
It got bumpy but we locked in a great profit- and hopefully you have seen the comments section in real time: So- as promised we leg in by selling 2x 7150 calls at 36 =72
we buy 1×6850 put at 48= 48
then we sell 2×6950 puts at 91=182(market has dropped but only 40 points)
We now have a put butterfly and a call ratio spread,
and a small credit of 206-195= 11.
We use that to roll up 1 short 7150 call to 7200. Thus our risk is out further to 7300
As of 23 Apr settlement the put butterfly = 19.5, The call ladder 13.5. We run this for fun,too
30 Apr 7050 call 45.5 and the put 145
7150 call 17.5 7200 call 10 6950 put 92.5 6850 put 58.5
Call position 45.5 -( 17.5+10)= 18 credit Put position 145+ 58.5 minus( 92.5×2)= 18 credit
Now…. All positions, when tallied, show a profit of around 40
Had we run this to expiry we’d make 50 (Expiry at 21May at 7000) WIN!
217 If You can’t be Original….
When it makes no sense to do something exotic we sell a 6650 put 31.5 and a call spread 7000 52.5, 7050 35
This is of course a Jade Lizard, selling the call spread and a put to give us ±50 credit.( ok it’s 49) Enjoy.
Now 6650 put 25.5 and the call spread 67, 45.5 = 47
About 34 now -not looking great after this sudden melt up, but we make some small coin. It’s a hold to expiry, though
Collect the full 49. WIN!
218 20 days to go, Nuts in May pt 2
Caveat- this is a pure exercise and not for the faint hearted. Our remit is a new trade every week, so………………. once again, buckle up We are buying the 7050 put for 145 and selling 2x 6950 put at 92.5 (185) A credit of 40. This is inspired by the CBOE Webcast.
So…. 3.5 to close out- what the??????? Huge WIN, but there could be a whole lot more as we own the spread between 7050 and 6950.
Credit of 50 at expiry WIN!
219 I don’t Make Predictions and I never will
7200 call 28 6950 put 23
We are selling the calls and buying the puts
This from 11th May:
Well to quote, the market can “EAT MY SHORTS”
Our combo- now a credit 79-6= 73 WIN, close out take a break. WIN!
220 A New Expiry-June
Open Interest Anomoly Trade -this is fun. The OI for puts is greatest at 6200, and for calls 7300. So,let’s go long both sides and SELL at these strikes ( 12, 9.5) and BUY nearer the money, at 6400(18) and 7225 (21.5). We are creating a short iron something. (Sloppy condor?) Thus we are buying these unlikely looking spreads.
So, our debit 18 -that is our max risk. The point of this trade is that it can be morphed into something way more interesting
And this- fun link to P&L chart https://optioncreator.com/stu4d4d
