That Was The Week More Crazy Money Found a Home
The world of IPOs went nuts again as the cash tsunami saw Rivian launch, and whose market capitalization exceeds Ford and GM. It is valued at about $100 billion. Facebook was worth $12 billion at launch, by comparison. We live in a world where it’s believed the value of global derivatives is now about $1 Quadrillion.(According to RT’s Max Keiser ) A Quadrillion is either 1 followed by 15 noughts if you’re American, or 1 followed by 24 noughts if you’re British. So if your mind is boggled you’re not alone. It’s an insanely big number- but being derivatives means they could well nett off to Zero.
Here’s an interesting link https://www.reuters.com/business/global-debt-is-fast-approaching-record-300-trillion-iif-2021-09-14/
We seem to live in a world where debt doesn’t matter. At some point it will matter and that may be our grandchildren’s problem. Inflation running hot at >6% means this:
This idiot paid the price for personal bias- if you read last week’s missive about the 12 confirmation biases. There’s a 13th, saved for options traders. It’s this: I believe I can sell call strategies because the FTSE won’t ever do >5% in a month.
Fun fact: Having asked a friend(some years ago) to analyse expiry week data, he came up with 19 years’ worth of events. Not once did it exceed 3.6%. I duly placed a short call strategy in the upcoming expiry week. FTSE went up 3.9%. The lesson is that we can put our own spin on anything, and while the data suggested it was the right thing to do, it wasn’t that one time. It probably was for the next 5 years, but I’d ‘moved on’.
Currently I will admit to such folly once more, and will reveal all when it is adjusted.
Distraction Trades:
DAX– some pause for thought:3 days: no entries, 2 days: 1 break even, 1 +90. The market has really changed and time to move on? While DAX does offer some big moves it may all be in the timing.
XRPUSD Now it has drifted back to $1.18 and overall not much to see here.
ADA Cardano – again this idiot was tempted in at $2.35 for the long haul. It’s now $2.00 This is not for trading it’s a small position to tuck away. Remember this is the person who failed to buy BTC at $11 back in the day.I still don’t understand the digital wallet and the platforms and even BTC’s busioness model. Which is why I’m having a bit of fun with this. FOMO, again. I do NOT recommend anything here ever- we just do this for fun, for education. Always DYOR.
Here’s a chart from eToro:
Legacy trades and 242 Nuts to the Rules!
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 have closed out and made 12.5 or £125 on about £3000 on margin= 4%(annualised that’s 200% )
So, the call spread is 55-31.5 The put is 5.5 Giving us 29 debit – remember we took in 50 We run it but would be comfortable taking 21 profit*
*How right we were
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.
We sold the Oct 7000 put and 7300 call, taking in 69, we then had to pay an extra 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.
Was……. OCT 26+44.5 Nov 66+88.5 = 84 Not a happy trade but should we double down?
This trader found it worrying that vol is lower for the Dec put
Guess what? It’s still 85! 2 Weeks on and it’s just losing money -trade selection needs the Greeks to line up and here they just don’t.
This week it’s ………89 Not a fun trade but we learn
Trade 241 Seeking Value When Vol Stinks!
Forlorn hope, it seems. 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 Was 0.5 to close -so a huge win, trebling our credit- 300% …. Kidding! It’s a nothing trade. Moreover it’s not a great use of margin, as of course we have sold more puts than we bought.
Now- Zero!
Trade 242 Pitchfork Without Rules
We try this trade which comprise usually a short call and 3 short puts at the same strike, but entry has strict criteria and this doesn’t. So the 7200 strike gives us the call 124.5 and puts 29.5×3 Should FTSE expire at 7200 we keep the whole 213 and we win if expiry is within 7412 and 6988
Makes you think doesn’t it? Should we bet the farm on this? We’ve seen the so-called safe calendar trades do nothing but cause us anxiety, when this looks like fun.
Correction! downside risk is at 7130
OK so we tracked this during the week and it closed on Friday worth 174 that is the best price to date- good trade, and while it’s a nice win, we run to expiry for fun.
Apologies for last week’s ‘flu jab inspired error!
Trade243
Star Wars afficianados will understand: [Luke: I used to bullseye womp rats in my T-16 back home. They’re not much bigger than two meters.]
We try a bullseye butterfly – by which I mean we’ll set the centre at the strike of 7300. It’s an expiry ‘fly for Nov and we’re using calls. Thus we have long 7250 at 104, short x2 7300 at 64 7350 at 32.5 Giving us a debit of 8.5 and that is our risk.
We’ll keep a weather eye on it as it could make max 50 minus our 8.5 debit, but if it hit 20 we’d be happy
