That Was The Week
For once the markets moved in lock step as they should- VIX drops when markets rise. Clearly the Kool Aid is being consumed in copious amounts as the S&P rises almost 4%. Marketcap of the S&P is now >20 times FTSE. So it’s no surpise most profit seekers gravitate to the US. However, the options world thrives here in the dank cellar, away from the glam and glare of sensationalism. We are truly grateful.
No need to talk of the Downing Street pantomime, but yet again the Evergrande default rears its ugly head. China is still ‘inscrutable’. Who knew the Express were such illuminati of the financial world? https://www.express.co.uk/finance/city/1533944/global-economy-evergrande-defaults-debt-chinese-real-estate-companies
The demise of this behemoth may well have been ‘marked to market’ long ago. We all know the market hates surprises.
Meanwhile thanks to Twitter for this fascinating piece:
https://twitter.com/nntaleb/status/1469296635167526913?s=20
Wonder what happened from 1987 onwards………….
Distraction Trades
DAX……. Oh dear we are all at sea- 4 no entries and one break even. So, the market has changed character, the strategy hasn’t.
XRPUSD $0.8455 However, really not tempted
ADAUSD $1.30 – Are Crypto’s dying? Not tempted to throw any more cash at this.
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
Last week:
Ugh! The whole thing was about 200 – VIX was around 18 at the time of opening the trade.
This week we have a total of 95.5. ( initial credit 153.5) We make 58 WIN!
Trade 245 – Vol Explosion means SELL!
The conventional wisdom told us 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. Was 74 and 34 a modest gain and last 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.
This Week:
It got ugly! 123.5+1.5= 125 -a break even
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
This Week
303 and…..7×3! =324. However we took in 446 We’d happily close out but will run for fun WIN!
Trade 47 Ratio Calendar
7150 for no particular reason, is our strike. We sell 3x Dec puts and buy 1 Jan put. So, those prices- 91.5 -(19.5×3)= 33
The rationale- we may see a bit of uppy/downy but the market is ignoring economic stuff, while the free money (QE) is still in play. For fun here’s the risk graph https://optioncreator.com/stwx4u6
