That Was The Week FTSE Tanked For a Day
Huge drop on Thursday prompting this trader into action after a very fortuitous month, and positions closed out. The smash upwards on Friday prompted a real Vol crush VIX from 20 down to 16. These down days seem latterly to occur in isolation -April 20, May 11, Jun18, Jul 08. While there may be a few mildly down days around them the bounce back is sharp. Who knows what’s going on?
So, last week we gave you a couple of links to positive pundits. One concern from Money week:
However, plummeting bond yields means……… funds are buying bonds as a safe haven, but do they usually presage a drop for equities?
Also, a gift from Money Week: https://moneyweek.com/investments/investment-strategy/too-embarrassed-to-ask/603507/what-is-an-option?refid=E0661DA38AB471CED3A0E181367F33E4&utm_campaign=money-morning-newsletter&utm_medium=email&utm_source=newsletter
I love the title- too embarrassed. That’s what I usually think, when people ask what I do. Trading options is not a topic for seduction or winning friends. In fact it’s tried and tested as a sedative. Nobody ever says ‘options,I’d love to know more’ at a party. Thus I admit to trading options when the company may not be as desirable as one would like!
Distraction Trades
DAX– One good trade on Monday and 3 misses. The system does not pick up all the big runners, it avoids losses. However DAX was in volatile territory this week.
XRP oh dear! https://uk.investing.com/crypto/xrp/xrp-usd-advanced-chart
Thankfully this represents <0.5% of my portfolio, so it’s still a punt,(long term investment) though the weekly chart seems to show this level may be strong support having formerly been resistance
Legacy Trades and 226 Spicy Calls
Trade 224 Expiry :July, a 4 by 1
This is NOT, repeat NOT for the faint-hearted. We are selling 4(four) 6500 puts and buying only 1 solitary 7000 put. Those prices: 29×4, 120.5. Debit 4.5 .
8 (x4) and 41.5 = 9.5. The max we could have got last week was 12.5, 4.5 cost, so we made 8.
We will keep it going up to expiry in case there is a big plummet, but common sense says take the 18, when it was opened for a debit of 4.5.
Common sense? Nah! Thursday’s big drop gave us 53.5 and (3.5 x4) =39.5 We paid 4.5,remember so we made 35. WIN!
Trade 225 And That Friday Vol Crush
Fans of the strangle would be delighted this week as the 7200 call (32.5) and 6950 put (27) =59.5 credit from Thursday, became 25+22= 47. Easy money isn’t it? However, these are lousy premiums for our Friday entry.
Readers tell us we still need a weekly trade, so …..a bit of a forlorn hope this but it’s an iron butterfly- selling the body, buying the wings. However this is new ground using the ’25’ strikes our centre is 7125 with wings at 7225(calls) and 7025(puts) Risk is 100 minus Premium taken in. (58+68=126) – (17.5+35=52.5). Thus we take in 73.5. We know that our risk is 26.5. Max profit 73.5…….
This week it’s 64.5 to close out and frankly unless expiry lands precisely on 7125, it’s anyone’s guess. We’d possibly close out for tiny profit 9 (Running to expiry for fun)
Trade226
The Thursday strangle did little for july though using Aug options it made a tad under 10%– big numbers of course, opened for 158, closed for 144.
We are going big potatoes with a very spicy calendar. We sell 3x 7175 July calls (20×3)=60 and we buy one Aug 7175 call for 68.5 Thus we are taking a fair risk on not having a big rise. Time and again we’ve seen FTSE wiffle around at these levels. However we could do some interesting adjustments so it’s racy, it’s fun and it may be a big winner.
