That Was The Week Tiny Rise in the ‘F’ While The US Goes Postal in Oct
CBOE kindly give us these figures that show it’s been a year’s rise in a month for the US.
We note the numbers that interest us in the right hand column. Volatility. We should be thankful for the turgid instrument that we trade. FTSE is the poor cousin, but still saw a 2.13% rise. November 2020 it should be noted, saw a 12.35% rise in FTSE while the US saw 10.3%. History is no guide….or is it?
Meanwhile a few freebies:
They say ‘advanced’ strategies – like trade 240! We show most of what is sensible and ‘recognised’ by the exchanges.
Next up from our friends at CBOE, I have to say I’m not amazed by these but you may find it helpful to screenshot some of the charts https://onlinexperiences.com/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowUUID=D3219D74-565E-4B33-8471-7D3D36080423&AffiliateData=pardot
Lastly a nice piece about VIX and how volatility is everything to us. Contango is normal but we have backwardation in Trade 240-check it out. https://www.thetechnicaltraders.com/what-is-contango-in-the-vix/
So with little in the news- Covid is rampant and on the rise massively in Eastern Europe and Scandinavia. Nobody cares as the death toll is getting ugly and our very own Plague Island must surely be facing another lockdown. Stay safe
Distraction Trades
My technical issues deny us the charts this week and I failed with screenshots so DAX trades were nothing to write home about. This may have to be reviewed, and we may flip to the US where every day is either up, or if there’s a drop the buying comes in at the open 2.30 or around 4.30 pm UK time. Again this pantomime is clearly serving a ‘lot’ of people, and the cynic in me finds it irritating, and not tempted to join in. I wonder if maybe it’s time to drop the attitude!
XRPUSD Alarmists in the media claimed BTC was going to hell (it wasn’t) our little crypto wiffled around $0.94 to $1.15 I’m still way too cheap to get involved, but day traders may have done ok- or should I say night traders. We see the action was done more or less before 08:00 am Thursday.
Legacy trades and 241 -Scratching around
Trade 239 Nov Expiry
Jade Lizard anyone? OK let’s go with: selling the 7300/7350 call spread and a naked 6900 put. 56.5-37= 19.5 for the call spread and 30.5 for the put. Maths PhDs will know that this equals a credit of 50. Risk of loss is therefore at 6850
Was 22.5+ (35.5-20.5)=37.5 We could close out and make 12.5 or £125 on about £3000 on margin= 4%(annualised that’s 200% )
So, the call spread is 44.5-25.5= 19. The put is 17.5 Giving us 36.5 debit – remember we took in 50
Trade240 Big Spender
Yikes! Again with this drifting moribund volatility (makes me laugh when the ‘experts’ talk about this volatile market, when they are selling something!) Fact is: Vol is low. Here’s some Greeks.
We sold the Oct 7000 put and 7300 call, taking in 69, we then had to pay 92.5 to buy the far month(Dec) same strikes. Frankly, looking at a diagonal ( selling further out of the money) would be crazy money. We remain unconvinced and may come back to compare this with a diagonal. It’s all a bit pricey for us.
Now……. OCT 26+44.5 Nov 66+88.5 = 84 Not a happy trade but should we double down? Here’s the Greeks:
This trader finds it worrying that vol is lower for the Dec put
Trade 241 Seeking Value When Vol Stinks!
We now have <3 weeks in this expiry cycle. Theta should be making big inroads into premiums. November 19th is that third friday of the month. Actual trading days, however amount to 14, plus 2 hours on the Friday. My own take is that we may see some downside as the up/down day count is now: 116/96. The bias historically used to be 51% up.
An old chestnut (seasonality!) A put ratio spread. We buy the nearer the money strike and sell a number of options further out. We go with a simple 1×2 here, buying the 7100 and selling 2×6950 puts for Nov expiry. Prices 40.5 and 21(x2) Our trade gives us a tiny credit therefore of 1.5
