What’sGoing On?
That was The Week
More crazy times – non farm payrolls, FED tightening, Omicron variant and dumb anti-vaxxers. Expected job numbers + 543K, Actual number 210K. However, in isolation does it mean much? Is November’s number just an outlier? Gentle reader, you decide:
Our own trading and trade selection is always about having some kind of idea what the market has been doing. We try to construct a considered view of the kind or activity one might expect. We often cite, for example, the VIX being mean reverting, so you expect vol to move back to the mid range. However I was recently drawn to this hitherto unknown VIX concept about 50 seconds in the clip from the esteemed Keith Cotterill: https://www.youtube.com/watch?v=klAOOOW8b_E
Today’s additional S&P chart shows the variance in the market, when FTSE normally tags along like a lovelorn puppy. Currencies are showing curious signs. Crypto’s have gone down the proverbial. One might feel that unseen actors are ganging up against the blockchain brotherhood.
Distraction Trades
ADA Cardano now $1.39 a mahoosive drop of 42% Do we add to a losing trade? Only in options trading, when our view has not changed, but prices have.
XRP Etherium now $0.83 hard to know if there’s any upside
DAX 3 (three) losses and 2 no entries- smashed to bits this week -the stop loss is 30 though we do win big when it happens- 100+
Legacy Trades and 246
Trade 244 Dec Expiry but Is Santa Languishing in Bed Nursing Ills?
December expiry and we have 4 weeks –20 trading days to exploit.
The ‘Big Lizard’ – a variation on the Jade Lizard, whereby we sell an ATM call spread and ATM put.
This gave us( 7200 strike for convenience) 7200/7300 call spread 116.5-61.5=55 and the ATM 7200 put= 98.5. So this gave us a credit of 153.5. There’s no upside risk, in fact it’s peachy if the FTSE goes to the Moon. Downside……. well we have a credit so 7200- 153.5= risk at 7046.5 . We need FTSE >7050 to be safe, and that level may be at risk.
Last week- 7200 put was 226 – we let it go on, as we had no idea where we are headed. We could roll the put down to 6800 for 68, which puts us around the break even point. It’s anyone’s guess but the put has more than doubled.
The call spread is 65.5- 33= 22.5
This week:
Ugh! The whole thing is now about 200 – VIX was around 18 at the time of opening the trade.
Trade 245 – Vol Explosion means SELL!
The conventional wisdom says to SELL when vol explodes as it is always transitory- like inflation( We’re told)
Assume this is a short term outlier- again the wisdom is to sell the farm- and just for the sake of showing something, here’s a strangle: 7200 call for 65.5 and 6700 put for 61 -This would NOT, repeat NOT be one of our choices as we have a real unknown with omicron, the new variant. This post may come back to bite me. Now 74 and 34 a modest gain and this week the whole thing traded for <100 It’s not the worst trade if one has to be in the market collecting premiums, but it may get ugly yet.
Trade 246
When you have no clue as to market action…… we go with the bonkers trade, we all know and love- the Pitchfork. Now the entry criteria are not strictly adhered to but Vol is high and expiry is near.
We sell the 7000 call for 194 and sell 3x the 7000 put for 84. Giving us a mighty 194+252=446 Should FTSE expire at 7000 it’ll be a very merry Xmas
