That Was The Week A Nothing Chancellor Said Nothing, FTSE Went Nowhere
Thankfully for this nitwit, the FTSE had a breather, while continuing to ignore the spectre of recession. Americans returns to being jaunty and irrepressible as the S&P500 YTD is up 6.44%. FTSE up 2.79% (Though we had the Truss bounce ). The inflation issue is being swept away, interest rates will not be too high, and China will get back to 120% productivity. Talk of ‘soft landings’ may be optimisitic but for the real economy we don’t want to see any more brutal price hikes. Much murmuring about the obscene profits of the oil majors. Perhaps they could donate to good causes, like the rest of us!
Webinars this week. Another busy week being assailed with information views and informed opinion. One of the guv’nors, Larry Macmillan was pretty much the same as he was in the previous webinars but here’s a link for those who wish to dip in. https://mailchi.mp/optionstrategist/larry-mcmillan-jan-26-webinar-slides-recording?e=5f15d5ff5d
Options guru Larry declared he’d be interested in going long if and when S&P500 exceeded 4100 with most being being bullish over the 4000 level. Yet again he uses the idea of naked long options. (See Trade 299). Larry and I remain at variance!
And that chancellor’s speech……. Despite there being a Silicon Valley, Mr Hunt wants the UK to be another Silicon Valley. A cynical person might suggest this tired government has run out of ideas.
Distraction Trades
ADA Cardano $0.3796
XRP Ripple $0.41009 Still in the doldrums, and crypto seems to be attracting much negativity. Despite the possible benefits of blockchain it’s become the Wild West.
DAX 3 no entries 1 win 100 1 break even +30 Not a great week again and the highly specific set up is not giving us sufficient entries. The boredom trade.
Trade299 Getting our Revenge( Tip of the day: Never ever revenge trade)
We want to have some long exposure to puts as vol is ‘at a low’ but we never buy outright. We buy a put spread, buying the Feb 7900 put selling the 7750 put those prices :180.5 – 117.5 = 63. Then sell the Feb 8100 call at 45.5 to help pay for it. Thus, we have a fair bit of wiggle room if this takes off against us to the upside. Our cost 63-45.5=18.5
Last Thursday was optimum close, with those prices: 186 102.5, 10.5= 73.We paid 18.5, so 54.5 profit WIN! (Of Course we run for fun)*
*Closing price, not actually the low of the day which would have yielded another 20
Now?…….7900 put=156.5 7750 put=69.5 giving us 87. That 8100 call? It’s now 2 Bigger Win! 85
So, if we’d gone ‘naked’ as Larry Macmillan suggests, we would have paid 180.5 for the put and sold the call for 45.5. Which gave us a cost of 135.Now those prices 156.5 and 2. He’d have made 19.5.
Trade 300 A Milestone, Can we match Past Performance?
Yet again, the odd ratio calendar straddle reared its ugly head. Say whaaaat? It’s a multi leg strategy buying cheap near month(Feb) 7775 straddles for 102+97=199 x3 and paying for this by selling 2(two) March 7775 straddles. 149+158.5=307.5. Straddles are the combination of calls and puts ATM -at-the-money. So we pay 199×3= 597 and take in 307.5×2 =615. Our credit therefore is 18 our risk is that the market goes nowhere, but if those put trades are telling us something we have the advantage.
Note the theta (time decay) works against us x3, and time is not on our side (27 days) against the March lower theta x2, and 55 days to expiry. Not clear about this? Email us: [email protected]
So where are we now? The 2 Mar straddles are 243×2= 486, the 3 Feb straddles 150.5×3= 451.5. Losing 17.5 currently.
301 That Calendar Theme
In almost oppostion to trade 300 we have calendar ratio strangles -so we sell 2x Feb options and buy the same strikes in March, once. How much trouble can we get into? We are selling the Feb 7500 put 18 x2, and the 7800 call for 58×2. We are buying the Mar 7500 put for 56 and the 7800 call for 91. So the numbers: 36+116= 152 minus our cost 56+91= 147, giving us a credit of 5.
Here’s a link to the options creator which shows risk <7400 and >7600 max profit 200 https://optioncreator.com/st2h4dn
