That Was Expiry Week and We Had Big Wins
So, another funny old week and as the 5 day charts show the odd non-correlation with the US. After hours trading is also starting to look like knee jerk reversals. However it is hard to know if this is useful information as this is the futures market and they may be positioning to hedge. We try not to trade in isolation but to absorb all the available info would probably result in ‘analysis paralysis’. We can look at buy only put/call ratios but frankly this idiot has never found it helpful. Larry says otherwise: http://om/blog/2021/12/weekly-stock-market-commentary-12172021
Make of it what you will but I never know when he says buy, if he means to buy VIX!
Talking of put/call ratios and odd correlations- here’s the randomness guv’nor Nassim Taleb: https://fooledbyrandomnessdotcom.wordpress.com/2021/11/24/detecting-bs-in-correlation-windows/
I confess the maths is way beyond my tiny little brain and basic education. However I have, over the years, tried to find the sneaky inside track using all manner of comparisons and indicators. I continue to look at the historical data for clues, and we have noticed Vol dropping on a Friday, but of course not every Friday.
And here’s a reminder- all the trades taken here are for demonstration. Trade selection is based on very limited criteria,and sometimes purely on one single metric.
Distraction Trades -Diabolical Disaster
Dax 3 no entries 1 break even and +50 on Wed. Looking at other timeframes, this nitwit cannot see anything flagging up good entries.
XRPUSD $0.828 looking ugly
ADA $1.25 Still on a 4 month plummet
Are we seeing a slow demise of crypto’s despite having some practical applications? Should we tuck these away?
Legacy Trades Close for Big Wins and New Trade 247
Trade 244 Dec Expiry but Is Santa Languishing in Bed Nursing Ills?WIN!
December expiry 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.
Previous 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 was 65.5- 33= 22.5
2nd to Last week:
Ugh! The whole thing was about 200 – VIX was around 18 at the time of opening the trade.
last week we have a total of 95.5. ( initial credit 153.5) We make 58 WIN!
Terrific outcome at expiry (7264.5) So worst way we have to shell out 64.5 to close, but we took in 153.5 WIN!
Trade 245 – Vol Explosion means SELL! WIN!
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.
Last Week:
However,it got ugly! 123.5+1.5= 125 -a break even
Now…… Wednesday we saw we could close out for 33.5 for the call and 1 for the put(we took in 126.5) WIN!
Trade 246 Pitchfork WIN!
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
Last Week
303 and…..7×3! =324. However we took in 446 We’d happily close out but will run for fun WIN!
That call…… 264.5 at expiry, so from 446, this gives us a YUGE 181.5 WIN!
Trade 247 Ratio Calendar WIN!
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
Now 89.5 for the 7150 Jan put we bought, and it cost us only 33. But wait…….. we can use this as the lower wing of a super wide butterfly by buying the 7450 put and selling 2x the7300 puts. Paying 228.5 and getting 144×2 =288. Thus we now have a credit 59.5– our cost 33. We bank 26.5 and have a monster free zero risk butterfly, max profit 150.
Or….. we could sell 7050 put for 65.5 A risk free possible 100 profit and we trouser the 32.5.
Life’s good with options- say it aloud!
Trade 248 New Expiry Cycle …..already, and it’s 2022.
Like a field of freshly fallen snow, the prospect of venturing forth in a new expiry cycle is delicious. Of course we may on occasion stumble into a muddy hole but nothing ventured, nothing gained. So what can we find?
Oh wait…. we already have it! We morphed 247 into a huge butterfly 7150/7300/7450. This is already worth 30 and it’s what we would have to pay in normal circumstances. This is a kind of cheat but we need to show how options trading is ongoing and we cannot afford to miss entire trade entries, though sometimes finding a trade every single week is a big ask.
