296 W/e 09Dec Santa’s FTSE Swoon?

That was The Week – A Dip? Surely Some Mistake!

We have a bit of relief as the market takes a breath. FTSE has risen 13% since the low of 13 October. America’s S&P500 saw a  low on that day too, and had risen 17.5% but has now withdrawn somewhat from the key 4000 level. So we could be thinking 7500 was FTSE’s key level and perhaps the Santa rally has stalled. Curiously the P/E of our index has dropped from ±19 to 16.88 while FTSE has only dropped 1%. Quite how these numbers work might make a trader think they are not terribly reliable.

Fundamentals – the great swathe of metrics and depth of data is mind boggling- but it seems it’s worth as much as the flip of a coin. Perhaps I do a disservice to the fundamentalists, but quite how P/E can drop 14.5% when the market drops 1%  is way beyond this trader. Thank goodness options are reliable in terms of quantifying. The Greeks make way more sense than EBITDA, so in that sense we are possibly more ‘clued in’ than shareholders.

Distraction Trades -As Gloomy as It Gets

ADA $0.3125

XRP $0.3878

DAX   3 no entries, one break even(+30) One loser -30  Well it can be argued that it avoided losses while the market whipsawed around.

Those Cheeky Weekly Trades 293 -296  with  Expiry Looming

Pity we could not find a nice calendar trade to give us some long options but we have a clean sheet.

We can be long and short here with a call ratio spread for a ha’penny. We buy the Dec 7500 call for 58.5 and sell 2 of the 7600 calls for 29(x2)= 58

In anticipation of the Santa rally -we could make the max 100 with FTSE at 7600, we have risk at 7700. We have NO downside risk

Was 88 and 42.5 x2, gave us a credit of 3   this week 113, for the 7500  and for the 7600, 53×2= 7  let’s not get carried away.

Now 53 and 18(x2) which is 17-1/2  =16.5 in profit. 

Let’s keep it going but that is a healthy profit -given we may be at the start for a decline.

Trade 294 These Animals Keep Buying the FTSE!

OK so it seems there’s a battle at the top around 7500 and while our call position makes ££££ around there, if it drops, it’d be nice to cover that event too. We need to own some puts. Let’s buy a 7500 put and find a way to pay for it. Let’s go high risk and sell 3 puts to buy one. We will sell the 7250 strike put x3. So we have to pay 88 for the 7500 put and we collect 25.5×3. Our debit therefore is 11.5 with max profit 250. Where’s our risk? 

Can you see at 7250 we make 250, but at 7150 the short puts are worth 300 against our now, 350. So we need to ‘get out of Dodge’ if this market gets bearish big time. Break even then is at 7125 So in combination we have these  risks: for trade 293 at 7700, and 7125 from trade 294 with potentially big gains in between.

Those prices now:  7500 put= 43 and 7250s= 10.5×3 = 11.5 -watch this fly!

7500 put 71.5 and 7250s  11.5 x3, gives us 37  WIN!   We will run it too 

Trade 295 December, Santa rally yadda yadda

Regulars will know we have done ratio calendar straddles a few times but never with much success. Rather than keep such a pristine record sheet of wins, sometimes it’s good to see the warts an’ all moves. We buy 2 of the current month straddles( 7550 put AND call) and SELL the same straddle in January.

Those prices for Dec 7550 call and put  80 and 60   for January: 157 and 122.  So 140 x2, and 279 so we pay a penny.

The logic of this is that a sharp move would be of greater benefit to the short term volatility, and therefore any price increases in the near month would be relatively greater than those January prices. Here’s the calculator https://www.cmegroup.com/tools-information/quikstrike/options-calculator.html?utm_source=LINKEDIN_COMPANY

And for fun, check out the gamma and vega -but be aware of the brutal theta. There’s not a lot of hope but it’s fun. Let’s also explore the possibility of doing the reverse trade too.

Dec straddle 32 and 100.5   Jan straddle   105 and 156.5  This is such a bonkers trade and really not recommeded for expiry week, so we close out for tiny credit 3.5  But that’s not all- we run it for fun,though cannot see any possible way to profit now. Perhaps the reverse of this trade is the winner.

Trade 296 Ding Dong What Could go Wrong?

We no longer have a calendar spread- can we find value?

Here’s something to mull over in the festive season ( yes, pun intended!)

We will buy Jan 7400 put, for 97 and sell the Jan 7000 put for 31, and for the Dec expiry we sell 3x 7300 Dec puts for 16×3

 

So we have the 400 point wide Jan put spread and sell the 3 of the Dec puts but we till pay …..18

What’s the deal here? Upside risk limited to the cost of 10.  Downside? 7250  is an area of concern but if we expire below that we have several choices and are unlikely to get into too much of a pickle. Here’s the fun Options Strategy Creator- it maybe worth a look  https://optioncreator.com/stdd15j

Remember these trades are for educational purposes and outcomes are never ever guaranteed.