That Was The Week The Big Bucks Waded In
The plunge protection team, mythical or otherwise seemed to be doing the business. Thus ‘buy the ******* dip’ reared its ugly head yet again again, like a tired repeat of Coronation street. The cause of the dip was, allegedly, the property firm Evergrande. A Chinese behemoth, redolent of 2008‘s massive property crash in the US. However it’s not mortgage fraud or Ninja loans, it’s a company that is in deep trouble with bond and other loan repayments. We know China has built massive ‘ghost towns’ as one might expect of a ‘Communist’ central administration. No buyers, therefore.
Anecdotally, Stalin once told a shoe factory to increase productivity with limited materials, so they only made childrens’ shoes. Sometimes telling the boss it’s ‘not that simple’ in a totalitarian regime is an express route to the unthinkable. Personally I expected a dramatic impact, but perhaps it’s time to end my infatuation with the doom and gloom stories. China remains an enigma.
Distraction Trades – A Roller Coaster
DAX– a couple of good trades(100+) but of course missing the Monday plummet and the timing of these has been variable, though we stick with early morning. The character of the market has changed our method has not, but our entry times have had to be flexible.
XRPUSD Here’s a fun graphic from my eToro account:
It’s a bit of fun -note the sentiment indicator- virtually all buyers? Seriously? Anyway not tempted back in yet though XRP is now $0.92-95.
Legacy Trades and Pause for Thought, (Having missed the action)
Trade 235 October Expiry
Time to buckle up and play safe?
What could be safer* than an iron butterfly? We sell the straddle, buy the strangle and hope our strikes hit the sweet spot, as this may not do much in the meanwhile. We take in…… and our risk is 100 minus our credit Near expiry we may be able to have some fun with it too, morphing, rolling and maybe a ratio here or there. Here’s the graphic:
OK it’s 110+130 minus 60+95.5 I’m really not doing that for you!
* Is anything safe?
Currently 87.5 maybe not time to panic
Trade 236 Ugly Trade Following Bizarre Week
Here’s the Greeks: 
We are selling……. yes selling the 6800 and ….buying 2x the 6700 puts
Thus we have a debit trade, costing (29×2)- 40 =18
This trade only makes money when the Vol kicks up a fair bit, it’s not attractive as theta works against us and we really need a good drop. It’s safer though in the event of a catastrophe as we can only lose the value of the short spread, and let’s say we drop to 6800, it would make a good return. That, however also depends on the speed of the market drop. Slow burn will kill us, if boredom doesn’t get us first!
No, we don’t like it but Murphy’s law says we are wrong. Whatever the outcome it will be a good lesson.
