That Was The Week We Saw a Big Drop
What spooked the market? Covid, Global Warming- induced catastrophes,earthquakes, wars, collapse in Afghanistan? No, the FED muttered about tapering –that’s why the market wobbled. Tapering means buying fewer assets.Since July 2020, the Fed has been buying $80 billion of Treasury securities and $40 billion of agency mortgage-backed securities (MBS) each month. So if anyone thinks this is going to stop sometime they are right. However the question is, when? Next week, next month, next year?
So, a storm in the real economy may be brewing. But, does this affect the stock market when we are faced with and end to the tenant eviction moratorium, and a drop in welfare payments here and in the US? Property, or to be more specific, mortgage problems were what caused the 2008 credit crunch. However back then MBS‘s were a joke. Remember Ninja loans? No income, no job or assets. Hopefully the existing mortgage market is healthier and we’re told savings are at record highs along with job vacancies. So this time it’s different(?)
Options And The UK
I am bombarded weekly with emails offering options education, and much of it is frankly pretty decent. However it is all, 100% from American sources, such as https://www.optionseducation.org/theoptionseducationcenter/free-options-education-en?utm_source=816&utm_medium=DedEmail&utm_campaign=OCCLearning
In previous weeks we have posted links from venerable sources, and it’s such a crying shame that the UK is so bereft of decent options resources. It’s why we’re here, offering our education in the form of trades, both winners and losers. Sometimes ill considered and random – we say when we don’t like something. But the aim is to educate. Our passion is options trading, and generating healthy profits. The UK is swamped with forex gurus. Quick buck merchants who rely on a churn of newbies. Some may persist and start to trade profitably. Options trading is for life.
Ironically in a Google search for options brokers this popped up: 
That summarises the risible state of play here!
Distraction Trades
DAX 1 trade, for a credit 90 4 no entries- not a happy week again. However we know long term our system avoids losers, so we stick with it.
XRP For goodness sake! Closed out and made 50% ( Bought at 1.03, 0.80, 0.698) Sold at 1.1849 then it dropped to 1.08 Thought I was a genius!
More bullish trading as XRP now climbs to 1.245.
Legacy Trades 232 a New Expiry cycle, Tempted by Calls
228 We Might Get Conservative – oh wait. We’re not Political
Here’s our dabble with a pitchfork*-sell a deep ITM call ( 313) and 3 xputs (31.5) at the same strike 6700
However, we hadn’t tried this in a while and frankly the put vol was 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.
Best we could do? On Wednesday 21st July the trade made 7!
Thursday 19th August…………353 We sold at 407.5 so if we’d held on(unlikely) we’d have made 54.5
Hard to claim this as a win, we would not have held our nerve.
*This did not meet Pitchfork criteria it was a fun trade- as always DYOR.
Trade 229 The Open Interest Gambit
A comfortable WIN
Trade 230 Calendar Time?
Well it’s not a happy time and if one expected a Vol explosion we’d do a reverse calendar. However we ‘seem’ to be in a tight range, so we’re selling:
Aug 6850 puts x3,(13.5) Aug7150 calls(24) x3 and BUYING Sep 6850 put for 61, Sep 7150 call for 71.
Even with this brutal ratio play we’re still placing a debit trade- a cost of 19.5. Hmmm not happy
That Aug strangle went out for 0 Happy days after a bonkers week plus 52 for Sep put and 60.5 for the Sep call( minus 19.5 cost) =93 MONSTER WIN!!!
Trade 231 and a Dodgy Threefer
This market seems to be hellbent on rising but we may see a litle downside and to position for that we buy 1×7250 put and SELL 3×7150 puts
Those prices 58.5 (35 intrinsic more or less) minus the short 7150 s 13.5 x3= 40.5 We have a debit of 18 we have risk at 7100 but could make 82. Theta favours us and a dull week would surely help out. Ideally of course, we’d like a dip down to 7150 at 10.15 am on Friday, please
By Wednesday we had a freaky credit of 103.5- 25.5 x3= 27, minus our cost of 18.
Left to run to expiry?…. we’d have 7250- 7042= 208, minus 7150-7042= 108. debit 116+18= 134 Horrible loser !
Trade 232 Broken Wing Condor
In fact it’s a one winged condor! We are buying the 7150 call, selling the 7200 call AND selling the 7250 call.
Risk…… unlimited minus the long 7150/7200 call spread (not normally recommended, but of course you can roll up,down and along)
Logic of the trade, the market has double topped around 7220 and the bear/bull argument seems to be in balance. No downside risk and tiny credit 2.5 Just one quirk- look at the volatility -that’s not a smile, that’s a grimace.
