That Was The Week, The Upward Grind Continues(We have 4 Consecutive Losing Trades )
It’s all peachy still, we’re told. Nothing to see here! I think it’s hard to know how things really are though US bank stocks have weathered the recent storm. To quote ‘there’s no bull market without the banks’. So, it remains to be seen how much effect higher rates have as banks hold on to low yielding bonds. We crossed fingers for Elon, though the unscheduled disassembly was not a total disaster. Politicians, when confessing to the latest disaster are fond of saying ‘lessons will be learned’. However, at Space-X that actually happens. Worthy of note: escape velocity is exactly 1,000 times the max speed of Usain Bolt (11.2 M/s against 11.2Km/s). Space-X we love you. Hats off to Elon for shrugging off the loss and carrying on regardless.
On a cheery note, Fox News took a big hit after deliberately making false claims about the 2020 election being stolen. It is curious really as we know the 2020 and 2016 elections were ‘stolen’ from the Democrats, who polled so many more votes. Political? Moi? What is hard to understand, is the painfully slow legal processes. I find this amusingly reminiscent of school days when any delay in summary justice meant at least we could quickly cobble together an alibi!
Trading Shocker. Brokers Reveal Their %age of Losers
12 forex brokers:
- Darwinex – 64%
- Tickmill UK – 71%
- AVA Trade – 71%
- HotForex – 71%
- Forex.com – 73%
- Saxo Bank – 74%
- Oanda – 75%
- IC Markets – 76%
- IG Markets – 76%
- Pepperstone – 76%
- XM Group – 78%
- FxPro – 85%
Imagine, you are new to trading and you think Forex looks simple enough. After all it’s either up or down according to the vagaries of a wobbly line. Like CFDs you have to be exceptionally good/lucky. So, whilst it’s not known how many losing options traders there are by %age with each broker, there is an element of longevity. I understand most options brokers have clients for decades. However, brokers need us to survive. We need to survive! Options as we oft repeat,can make winning trades out of losing trades. Strategies mean we don’t need to be directional. thus we don’t need to have a specific view of how far for how long.
Barriers to entry(cost and experience) eliminate options for the ‘chancers’ who may last a few months with a few thousand quid, in Forex, and that’s sad for them. The market needs participants, not an endless churn of hapless losers. The longer we trade the ‘luckier’ we get.
Distraction Trades
ADA $0.3906
XRP $0.4537 The brief flurry seems to have diminished.
DAX 1 win +60, I breakeven+30 3 no entries pretty lacklustre week.
Trade 309 Sentiment =denial, let’s test that proposition. (I think we might see another plummet!)
We like the idea of….. oh wait. We don’t really like these things, but in view of the fact there’s no market moving news until Thursday, let’s see if FTSE vol will shrink further. And to save a bit of legwork here’s a nice explanation: https://www.optionsplaybook.com/option-strategies/iron-butterfly/
We choose the 7400 ATM strike and buy the wings at 7200(put and 7600(call). Gives us ( 147.5+144.5) – ( 85.5+48.5) = Credit 158. Worst outcome, the FTSE smashes either side of the wings- ie <7200 or >7600. We need a quick round turn. We need vol to drop off.
Worst outcome – it’s here! 299- 126= 173 Losing 15 so we will let this run, but not much hope of a turnaround. ( we never like these and would usually close out quickly, or not take the trade!)
Also looked at this with 7600 put and 7200 call– same misery! 229 cost, current value 216.5
Ugly Again
7400 straddle 354 and 10, 7200 call 547 7200 put 5.5 7600 call 168.5, put 26.5 Thus we have 364- (168.5+5.5) =190 a loss of 32 or (547+26.5) – 364( the straddle) gives us 209.5
LOSER 42 but it was always a forlorn hope.
Trade 310, a Diagonal Twist
A diagonal is a short option in April, the front month and a long option with a higher value strike in May, the next month, and here we favour the puts. Normally we buy the 7600 May put and sell the Apr 7500 put, but it’s rather expensive. In fact we have 130.5-43= 87.5. We have a litle more risk but we sell the 7200 May put for 44.5 bringing our cost down to 43 the max reward will be 400*-43= 357. We risk losing some or all of our premium if the market takes off skywards, and on the downside we have risk at 7500- 400*= 7100 and we surmise there is strong support at 7300. Thus we are delta neutral and theta works nicely for us. [for fun I am tracking an equivalent trade with calls, but its risk/reward is not as good]
*400 is the max value of the 7600/7200 spread, remember.
LOSER But, it’s not the end of the world 16.5 remaining value, our debit 43.Loss 26.5 Calls? 273-112 =161, Apr 7700 call 220(?) cost us 30, lost 59, 89 total.Truly horrible
Trade 311 Spring Fever or A False Dawn? Time for A fun Vol trade……..This might hurt.(It hurt!)
We note the following prices: 7600 May put 81.5 7600 April put 26.5 Anyone spot a crazy fun trade? Let’s sell the May put and buy 3 April puts with the premium (3×26.5=79.5 ) Gives us a credit of 2. Does this make any sense? The esteemed Price Headley has made the case for reverse calendar spreads when vol is very low and it is not unreasonable to expect it to have an up move. We’re going all in with a 3 x 1.
Now we have May 7600 put 39.5, April 7600 put 4.5×3= 13.5.26-2 credit LOSER ( Please note erratum- I had declared this a WIN before editing) Horrible!!!!
Trade 312 A Jelly Roll , That’s Right, A Jelly Roll
This trade comprises short call in the near month(Apr) and long put at the same strike. This is then reversed in the far month(May) Thus we have:
The strike is 7850 April- call 52.5 put=26 May call 110.5 put 98.5. We sell the Apr call and May put= 151, and buy the Apr put and May call 136.5. Gives us a credit 14.5. after expiry we may or may not be in profit but we are left with a long synthetic- the short put combined with long call give us a theoretical proxy for the underlying FTSE future. This is an old strategy that I have not ever tested, as it seems self defeating, though one or both April options could expire worthless.
LOSER! Apr -70, May +42= 28, minus our opening credit 14.5= loss 13.5
313 Let’s Try to Break That Losing Streak( We did Warn Those Trades Might Get Ugly)
As you’re aware, this is not about bragging rights, it’s about learning.We have extensive runs of wins and statistically we were due a run of losers. It’s a ‘cheap’ market, with no expectation of a big drop. However, we can maybe find a trade that is not a horrible loser! We find a long put spread 7850/7750 and a way to pay for it with a 7600 put. This gives us 70-46= 24 the cost of the spread, and we sell the 7600 put for 27, giving us a credit of 3. Thus, the trade can make a max 100+3, and is safe all the way down to 7500. There is of course, no risk to the upside(makes a change!)
For those new to options:
https://optionsinvesting.co.uk/special-edition-how-options-work-1/
https://optionsinvesting.co.uk/special-edition-how-options-work-2/
https://optionsinvesting.co.uk/how-options-work-page-3/
Contact: [email protected] If there is anything you’d like help with, we all started somewhere and yes, it can be baffling.
