That Was The Week -America’s Turn to go nuts with other people’s cash
America’s mid terms were not the mortal combat red wave event much touted by MAGA extremists. The US still has a serious problem with delusional lost people who fall prey to the fraudsters. However the FTSE was not affected by the absurd meltup -we had our own more sedate one last week. VIX now 22– about the same as the ludicrously over valued P/E of the S&P500.
FTSE ended the week down 50 and we can all breathe a sigh of relief. Who on earth can trade such crazy markets as the US? As if the meltup wasn’t enough, the crypto meltdown of FTX the crypto exchange*(don’t ask I have no idea either!) collapsed owing tens of $billions. The layers of complexity with crypto raise numerous red flags for this idiot. I Am well aware of the difficulties people have understanding options, at first contact. However our products exist and are registered with a proper exchange.
*I thought the entire point of crypto was to avoid centralised exchanges, blockchain being its own regulator.
Conundrum….
So, not being an economist/finance genius, what does this mean? If nobody has any money, surely that will mean a) recession b) the end of inflation c) mass unemployment. People will be poor. The trillions of dollars freely given in the last 14 years must surely find a home -is that home the stock market? 2 speed economy taken to the max. We may profit from the market but we can donate to charity too.
Distraction Trades
ADA $0.3449
XRP $0.37224
After the mayhem in crypto markets is this now just a forlorn hope? FOMO is not a reason to invest.
DAX 2 no entries, 2 losses( 30 each) one monster win 400 (Germany went nuts on Thursday)
Trade 289, 290,291, 292
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
Previous week- those prices at 6950 159+75, then the put at 6850 48, the call at 7050 99.5 gives us 86.5
Last week – yikes- the 6950 straddle 409.5 and 9.5 the 7050 call 315.5 and the 6850 put 6 -so 97.5 – Losing big.(9)
This week- still grim but it is a high reward low risk trade
Trade 290 That ‘New’ Strategy We claim no authorship of this but we will have fun seeing how it pans out.
This trade is a call spread risk reversal. Now a ‘risk reversal’ is a synthetic ie it mimics a future or another underlying instrument. You would sell a put to buy a call. In our example we sell a put to buy a call spread
Here’s the trade. We buy Nov 7000 call for 127.5 and sell the 7050 call for 99.5. This therefore, costs us 28. To pay for this we sell the 6725 put for 27.5.
As you can see we had zero risk to the upside but a max profit of 49.5 -nice! However, we have a naked put which may need to be adjusted.
This week 7000 call362 7050 call 315.5 6725 put 4 Gives us 46.5, the value of the call spread, minus 4 for the short put= 42.5. Close out and WIN!
Trade 291 Is this Meltup Sustainable?-This idiot hopes not.
We are placing a ratio spread buying one7450 call,(41) selling two 7500 calls. (27) ( November expiry)
So, the logic of the trade- we take in a credit (27×2)-41 =13 with zero downside risk. However, a possible max gain from the spread if FTSE hits 7500 at expiry of a further 50. Risk at 7550.
Now- this has gone well 12.5 and 6.5 x2 so a cost of 0.5 to close out but let’s run to expiry WIN!
Trade 292 as Vol drops to the floor
Let’s have a little put ladder( Nov expiry) we are buying the 7300 put for 40.5, selling the 7250 for 24 and selling the 7200 for 14. We have risk at 7150 and theta is a big help. Our cost is 40.5- (24+14) =2.5 Max reward? 50
Remember Friday 18th is expiry and it could be a monster…
