That Was The Week:BOOM! Big Down Day
Monday’s sell off was not the result of the intelligence of well reasoned sensible traders. It was group ‘intelligence’. That same ‘groupthink’ that hauled the wooden horse inside the impregnable walls of Troy. We have to remember people vote for dumb things because en masse we are dumb. Whilst we may be respectful of the many great minds in finance, Nassim Taleb makes his point here:https://twitter.com/nntaleb/status/1417154640186126337?s=20
So, the lesson is, don’t expect the market to behave rationally, but don’t be afraid to take managed risks for reasoned rewards. It’s how we roll. Not in anyway advocating signing up, or recommending this site but I like these 8 Do’s. https://www.thetechnicaltraders.com/eight-dos-and-donts-for-options-traders/
This trader thinks that with each passing week, and each winning trade, those who ignore options trading are missing such a massively superior way of trading the stockmarket. Index traders that we are, we don’t even get involved with individual stocks.
Distraction Trades
The DAX trades gave us one win 300+ on Monday and a loser -30 on Wednesday while missing other entries. Time to tinker? Nope.
Crypto continues to ‘tiptoe’ into the abyss. XRP now about 60¢ Bitcoin seems to have taken a tumble and has been hugely’ dissed’ by Nassim Taleb (Bit of a theme going on here)
Legacy Trades,Terrific Win and More To Come(?)
227 What is it with Calls?
We have done so well with big ratio spreads with puts, and latterly calls. However the difference in skew is interesting. We went for a bonkers 4×1 with calls and puts Selling 4 further out options as we buy nearer the money, but as can be seen the put strategy gives us much more wiggle room. There’s a lot of call open interest at 7200 and 7300 -we have big risk at around 7200, but we have the put side to tinker with.
Thus we were buying the 6950 call and 7000 put, and selling 4×7150 calls and 4×6500 puts. Have fun with the numbers- what’s the overall delta position?
Please note there was a famous fund that crashed doing precisley this sort of trade but you have to question their exit methods-some people have none!
Prices now: 100.5 and 17 for the puts 113 and 20 for the calls Thus we have 100.5+113, minus 17×4, 20×4 this gives us 65.5 YUUUGE WIN!
At the worst point- that flash crash on Monday- this was our put position: 258.5 and 68.5 Worried? Very far from it- we like this trade, but imagine we’d just sold naked puts.
228 We Might Get Conservative – oh wait. We’re not Political
Chart watchers may differ but the FTSE, to this idiot looks weak. Covid seems to be finding new ways to make mischief and the market is still toppy. FT quotes PER19.9%
Let’s have a dabble with a pitchfork-sell a deep ITM call and 3xputs at the same strike
We haven’t tried this in a while and frankly the put vol is pathetic at 16%. Theta is massive but our overall deltas are curiously 0.20. Margin will be brutal but this might give us a quick reward, while risk is modest though it looks a little crazy.
