That Was The Week FTSE Didn’t Blink
Prime minister Liz Truss invoked the worst of all reactions- not a murmur on the index! Such indifference must indeed be humbling. The pound rose just to add a bit of paprika into the mix. Honestly I’m sad for the poor woman on the basis of FTSE‘s failure to react. Perspective is needed with such events and clearly the give-a-sh*t-ometer registered zero, but we should always be prepared for the crazy stuff. Which brings us to:
Our winning trades. Contrary to the usual boasts from the people selling systems, we are only educational, but make no excuses for the exuberance at our performance. The down side is, you don’t learn from winning trades. We certainly do not advocate getting into our trades, and we hope nobody is blindly following. You learn, but so do we. Judging by the difficulty I’m having placing trades many of you are chasing the same positions!
A Trader’s Dilemma
It’s easy for us to show trades where we exit when we choose in the calm light of the Saturday morning with static numbers. What has arisen from a string of winners, is that nagging doubt in personal trades. My car radio randomly found Bloomberg on DAB and it scared the wotsit out of me, so I closed out a very promising trade. I should have run it to expiry and made 200+, but fear crept in. What if the market really takes a dump? What if it melts up as the FED do something bonkers? So, I took a goodish profit of 50. It is worth remembering all those times over the years where I couldn’t get one winner in a row. Maximising profits is key because there will always be lean times like 2020 and 2017. My years of experience count for nothing when emotion takes over.
Don’t be that guy! We show running to expiry AND early exits but if the trade has more, going into expiry, you know the answer.
By the way my trade made max gains at 6850 
Read on and be stunned by trade 288
Distraction Trades
ADA $0.35
XRP $0.465
DAX 3 wins-Yay! 220 points 1 no entry, one loss-30
Frankly I cannot see any mileage in crypto the DAX remains just a fun bit of action, but options are where the serious profits are.
Legacy Trades- 284- 288 Winners and 289
Trade 284 One near-the -money, two further out
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.
The Greeks!
Those Deltas 41×2- 64= 18. So at £10 a point for every 1 point the FTSE moves against us, costs £1.80, but that is an oversimplification, gamma, theta and vega will all need to be factored in, so by close of play on monday we may see a little buying coming in. Thus, we may see our position go positive. Rho can chill for the time being! ( Yes I got the interest rate wrong but it’s really academic) Calculator from CME https://www.cmegroup.com/tools-information/quikstrike/options-calculator.html?utm_source=LINKEDIN_COMPANY
Previous week, those prices the 6950 puts are 95 (x2)= 190 and the 7200 put is 238. Giving us a healthy 48 WIN! (but we’ll run it too)
So 128×2 and 333 Gives us a bigger WIN 77
Now 203+ at close of play Thursday WIN!
Trade 285, Ladder Time
Juicy premiums, yes, but again let calmer heads prevail and we can connect with Trade 284 by buying the 6700 put which creates a 7200/6950/6700 butterfly. But we don’t want to pay 69.5 for that 6700 put so we will finance it by selling 2x 6500 puts. We take in 80, giving us 11.5 credit. Now our risk is lowered to 6500 but we are in a 2×1 ratio, we are short 2 puts. We could also have looked at a strangle: selling a 7350 call (35.5)and a 6700 put (40) We would have upside risk >7350 but if the market did shoot up again, we could take some profits from the put position. This is going to be fun running to expiry with updates along the way. Hope everyone’s keeping up, but to summarise:
Long 7200 put and 6700 put. Last week: 330 and 88.5 = 418.5 Ouch! shorts were 452 or 5.5 in credit if we had sold a call
Short 6950 put x2,174×2 = 348 6500 putx2 = 52×2 or (or 6500 putx1, 7350callx1) ( 52 and 13 )=65
Losses turned around and now outlongs:7200 put 238 and 6700 put 34.5= 272.5
Shorts: 6950 puts at 95×2 6500 puts at 16.5 x2 = 223 Gives us a credit 48.5 Again we run it but it’s a WIN
This week:
Longs 7200 put 333 6700 put 30 gives us…………………363
Shorts: 6950 puts 128×2, 6500 puts 9×2 =256+18= 274
Can you say 87? WIN
Trade286 Playing Safe, FTSE =6893
Assuming margin is an issue then using regular spreads is the way to go. Regular followers will know where this is going. Iron……. Condor! We sell the near month options with strikes nearer the money(the index) and we buy a protective put and call
Here we go: we sell the 7250 call for 25.5 and buy the 7300 call for 18.5 AND we sell the 6700 put 88.5 and buy the 6650 put for 77.5 Mental arithmeticians will know how this pans out. 25.5- 18.5= 7 and 88.5-77.5= 11. 11 plus 7= 18. Our risk therefore is 50-18= 32.
Where is the risk? 7268 and 6682 Anywhere in between gives our max profit 18. There are 14.2 trading days in which to be wrong!
Was: 22, 15 (calls) and 34.5, 28.5(puts) so we have 7, 6 =13. We sold those spreads for 18, we’re on the right side of the crazy.
Now: Call spread 3-2= 1 Put spread 30-22=8 So, we are in profit to the tune of 18-9=9.
WIN! We collect the full 18 and our risk was limited to 32 Margin(capital required) limited to the strike width at £10 a point ie £500
Trade 287 Stepping up the Volume
Let’s go spicy with a big old calendar spread, selling Oct options, buying Nov options. What can we find?
We’ll do a 2 speed trade -a ratio calendar selling 3 front month buying 1 far month, and…….. doing 2×1
The 6700 put for Oct= 34.5 for Nov= 103.5
a) 3×1 – is zero cost ( there’s alway margin)
b) 2×1 more conservative but it costs us- can you see it? 34.5
It will be informative seeing how the trade unfolds.Typically these have done very well in the past, and we may have the challenge of needing to adjust.
Oct 6700 put 30 Nov 6700 put 120.5
Thus a) gives us a profit of 30.5
b) gives us a profit of 120.5 – (30×2+34.5)= 94.5. Profit 26
WIN! As expiry was 6876 the best we could win was 71 thus trade a) Riskier, was the winner,as you’d expect.
Trade 288 Let’s Go Bonkers
We are going to ratio a calendar straddle! FTSE cash 6859 We are using the 6875 strike and selling 2x Oct straddles( a call and a put at-the-money) and buying 1 of the Nov equivalent. It is at-the-money, so don’t like that much, then there’s the issue that we need the expiry at 6875-what are the chances this will make money? It may be a great way to show effective adjustment. Our cost- 366-( 170×2)= 26 Here’s the Calculator, and just look at that theta!
Note: Gamma is greatly increased near expiry, and so is theta. Deltas? Puts are always quoted as negative delta, but if you sell, you have a double negative or positive. Call delta is positive but if we sell it, the delta becomes negative. When Deltas are opposite and the same value it’s known as Delta neutral.
All clear now? Let’s sit back and watch the fireworks, this could get really spicy.
WARNING!!!! This is an unexpected massive WIN! This, frankly is so crazy, on Thursday we had Oct straddle at (72.5+5) x2 =155, Nov 188+124=312 The cost of this trade was 26 -oh come on, do the maths! Can you say 131? What if we run to expiry at 6876? We collect 310 (minus our 26 cost) That’s a massive 284
Trade 289 New Expiry, Any Old Iron?
Again let’s try and break something! We will have a slow burn, an iron butterfly. We buy protective call at 7050 (105) and protective put (102) at 6850- because we are selling the 6950 call and put 156 and 139.5 gives us 88.5, max profit, max possible loss 100-88.5= 11.5
As you can see from the options chain above those are the real prices so we will see how this sleepy little number plays out.
