That Was The Week
The World mourns a great loss, the market saw an uninspiring quad witching (stock index futures, stock index options, stock options, and single stock futures expire simultaneously). VIX remains high-ish at>25 Monday’s silliness was soon addressed and brought back to earth. Cynical observers may have thought fund managers just got new computer software and didn’t know where the sell button was. I couldn’t possibly comment!
Yet again after 283 trades we are showing you don’t need genius, charting skills, Quantum computing or witchcraft to make serious profits with options. You do need some money but don’t need fame! Nothing here is hyperbole, fake news or idle boasting. Nothing here requires a huge trading account, and if £30,000 is not a modest outlay remember you are not risking £30,000. All the trades here will never attract more than £5,000 in margin, so you would do multiple lots. How’s your cash ISA? How’s your stock ISA? Cash in (ignore my advice!) and open an options account. Or….. paper trade with a demo account and there is a modest platform from these excellent people. https://www.home.saxo/accounts/try-free-demo While it says 20 day limit- you just keep renewing, it is so simple. You can replicate our trades, or just wait for the next week’s missive.
Meanwhile if you’re a numbers geek, though this relates to the US market it’s interesting https://twitter.com/BergMilton
And who knew there is an S&P600?
Distraction Trades
ADA $0.4767
XRP $0.35399
DAX Blimey! 1 no entry 4 days 50,50,70, 200. This is by using a running stop, initially 30, then 20 not recommended unless you like an 08:00am roller coaster ride. Of course paper trading with any of the spreadbet platforms is free. And DAX often behaves very differently from FTSE.
Legacy Trades incl 283
Trade281 That wide ‘fly
Here’s our trade, a large butterfly buying the Sept 7350 put, selling 2 7150 puts and buying one 6950 put. Those prices: 81.5,38,19 gives us 100.5- (38×2) =76 thus: 24.5 Risk is limited to premium paid. However we will do this with a twist, and do some adjustments on the way so it’s not totally boring. These may be mid-week and we’ll try to keep you posted.(Sorry this did not happen in real time)
Here’s what we saw:
Last Thursday’s big drop made the 6950 put worth 54.5 and the remaining parts 7350, and short 7150 x2, for zero. Close out the whole deal? OK- nice profit 30. WIN! But wait….. sell that 6950 put and buy it back next day for 17.5. Nice profit 27 WIN! But here’s the kicker- we are still in the same bulletproof trade and it costs us minus 2.5 Still on board? Oh yes, and we saved a bundle on commissions.
Max profit 60 WIN! plus our cheeky credit 2.5
Trade 282 Variation of a Crazy Trade
We have, in the past, featured a trade that used straddles –buying 3 near month and selling 2 next month. You may recall it was rubbish last time.So, why do it now? Quite simply as the prices are so far apart we can buy 2 near month and sell 1 next month. We get the moves without the price, if the market moves either way. Theta is brutal but gamma is our ally.
So, our near month purchase 185.5×2=371. Our far month sale 368.5 Gamma is monster so one good day is all we need, while our premiums melt away if we hold for too long.
Posted on 5th Sept:
So, we paid 2.5 for the crazy straddle and it made the best price of 27, while the FTSE then limped back upstairs and the vol drifted sideways not giving us the front month skew we need to make 100+ which this thing does, when it works. Not happy to persist and at close it is now back around 4. Hand on heart we’d have closed this out this morning around 10.30 when it looked like the selling was over. WIN! 27 or less.
283 The Revenge Trade(Joking!!!!)
Apologies that I am using prices retrospectively but we know 100% that near month premiums shrink like a gent entering a cold swimming pool in January. We have shown this time and again that using the Thursday before expiry week gives us the optimum trades. Thus we sell the 7200 put x3(49.5×3)= 148.5 and buy the Oct 7200 put 147.5 Essentially a zero cost trade. However Friday’s melt up in concert with the vol crush made this trade a profit (106-( 17.5 x3) ) 53.5
Well that could have gone worse, massive 144.5 WIN!
This was not intended to be any kind of fudge to massage the win rate and apologies that events overtook me on Thursday. There is no way we could take this trade on Friday so let’s spice it up and place a call 3×1 selling 3x 7400 calls for Sept at 48, and buying 1 7400 call for Oct 48×3= 144 paying 152= Debit(we pay) 8.
7400 call ….86 WIN!
All Trades Closed, with Comfortable Wins and now a New Expiry and Trade284
Let’s take a look at an old staple- the ratio spread. We buy a higher strike put then sell two or more further out-of-the-money puts. As we have a legacy 7200 put from Trade 283 let’s use that and so we have 2 scenarios: We carry on with our free put, and sell 2 of the 6950 puts or we just open this as a new trade 144.5 – (2×73.5) A tiny credit to enter, or we are banking 177 as a continuation of trade 283.
Where’s the risk? We’d get a bit fidgety at 6700 and if the market lifts off again we may bank only a modest profit,as we have 2 lots of time decay versus one.
Hi, do you have annual performance figures?
Thanks for commenting, Harry. The ethos of the site is to demonstrate that with no particulkar skills but some study and testing, that you can make substantial gains. We do not look at our annual performance, we are purely ‘warts and all’ educational.
I’d rather comment on the losers and show adjustments, but we rarely have any.(Not a boast, just seems to go that way)
Some of the wins are substantial and based on return of capital employed you will often see a return of 20%.
Options are not thrilling, it is a slow burn, sometimes only for one day, but trades can take up to 45 days. Happy to comment on any trades you may have difficulty with.
Welcome to the site, and if you really want an idea of annual performance, conservatively we do 2-10% per month.