That Was The Week The Bear Started Sniffing Around
Dare we dream of a drift down to, oh wait…. FTSE‘s P/E is down to 16 yet nothing has changed.https://markets.ft.com/data/indices/tearsheet/summary?s=UKX.P:FSI It beggars belief that the economy has only flatlined, which looks to me, somewhat optimistic. Quite how this metric can drop 11% in a week is more than a little troubling, but the methodology is here: https://research.ftserussell.com/products/downloads/FTSE_UK_Index_Series_Guide_to_Calc.pdf
So, the housing market is looking like taking a drop again and home ownership underpins so much. What is going on? Oil companies are on fire(metaphorically)so the gas guzzlers have not lifted off to save a few precious grammes of carbon. However, recession ‘avoided’ and it’s all peachy. Perhaps we should ignore the media who seem hellbent in causing as much misery and misinformation as possible. And there was I thinking they were just being helpful! Steven Fry’s words spring to mind, as he said he stopped reading the news and his depression lifted. Wise counsel indeed.
Distraction Trades
ADA $0.3611 Quite a drop this week
XRP $0.38243 Matching ADA again. Not convincing action, it could all go to zero…..
DAX 2 wins +60. 2 no entries and one break even +30 Not so terrible but it plods along (yes, still looking for another instrument that might be more fun)
Legacy Trades and 303
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
Now? March prices 31.5 plus 155.5 Feb ( 6 + 129.5 ) x2= 271 and 187 for Mar. We are 84 in the hole.
We said: need to run this to expiry but this massive rise may remain ugly.
99 and 3(x2)= 204 and 143 and 41=184
Losing but now it’s only 20 (though it could have been closed out during the week for break even and it’s not a comfortable trade)
302 Dealing with A New Paradigm
It’s 100% certain that the market will be 5% below the all time high. Trouble is we don’t know when. It’s also possible it goes up each week and we don’t know if that trend will end any time soon. There’s not enough premium in the Feb options, so what to do? A cheap trade that most likely will do very little. We will try a put ratio spread buying a Feb 7850,(39.5) and selling 2x7750s (19.5). Gives us a debit of 0.5 and max profit therefore of 99.5. Risk at 7650.
Hard to get inspired in this insipid volatility, but if there’s a big move down, this thing will explode against us, so we need to be nimble.
Those prices now: 37 and 14 x2 = 9 in profit We’d take this meagre WIN
303 A Whole New Expiry, An Old Strategy
The regulars will spot this right away, and it’s maybe a cheap shot. Yes, it’s a strangle. We are selling Σ1 put and call. Tasty Traders will know this as a 1 standard deviation 16 delta strangle. Risk is unlimited on both sides, sort of. But the risk is at 8159 and 7416. We run these to 50% profit and if it still looks ok we run to expiry. Theta is ok but while vol is ok for the put that makes the call a very low vol item.
