That Was The Week The FTSE Self Corrected
So, another odd looking week as days started down and went up or vice versa. How can we make any kind of trading decisions when there seems no rhyme nor reason for this uppy downy stuff.?However as we come into the last quarter, we have seen 111 up days and 82 down. We don’t take too much notice but it would seem there is a surfeit of up days and normality might suggest a year’s data would give us 51-52% up days. We currently see this is skewed and could expect a balanced mix of ups and downs into year end. However we can have a run of 11 up days and that seasonal bias kicks in against the odds. Caution!
So, America may have a government shut down and readers here know we have a bias, which looks to us as if the Republicans want to burn down the house. The former guy is on a tour of crazy, and it’s hard to understand what kind of person thinks he is ok. America’s problems and China’s problems become our problems so it’s worth keeping a weather eye on things. https://www.bbc.co.uk/news/business-66840367
The ‘C’ Word
We know that sometimes things come out of left field -the Credit Crunch, Covid, Crypto crises. Pretty much anything beginning with a ‘c’ ! Yours truly was intrigued by the FTX collapse, especially as Crypto promised a world with no exchanges and regulators. I recall being completely baffled as to the means of purchase and safe storing of Bitcoin when it was $11, and so missed out. £500 worth would have done mighty well but typically my investments tend to be rubbish. This BBC programme went some way to explaining how $billions made their way to nice guy Sam. Although in fairness the UK utility companies are holding £8billion of our overpayments. Enjoy:
Distraction Trades -Nothing Much Use, Again
ADA $0.2508 Well we haven’t lost billions in missed profits, having closed out at $0.44
DAX 2 no entries 1 win +100, 1 break even +30 1 loser-30
UK Gilts £16.14 was £16.45 Ouch!
Legacy Trades: 333 – We morphed into Trade 334, plus 335,6.
We have a legacy of a long October 7550/7450 put spread, currently worth 13.5
Let’s look at:
1.Convert the trade into a 7750/ 7650/7550 put butterfly. We buy the 7750 put for 98.5, sell TWO 7650 puts 61.5, giving us a credit of 24.5. And magically that buys back our short 7450 put.
2. Convert to a put ratio spread by selling another 7450 put, giving us risk down 5% out of the money at 7350, it’s now a credit trade for 28 with a shot at collecting a further 100 if the FTSE takes a tumble.
3. Sell a 7350 put for 16.5, giving us an overall credit of 10 but risk now at 7250, with the chance of a max 100 points extra.
4. That’s enough! Yes we could do allsorts with calendars, condors et but let’s keep it as simple as your frazzled (this week) author
this week: well the spread is now worth: 52-31 = 21 The abysmal market action has done nothing for us, we need a decent down move that doesn’t melt up one hour later. Our 3 trade choices have done nothing, but this is a game of patience.
The spread is now 57.5 and 33 = 24.5 Another nothing week no particular advantage, but we’re in healthy profit
Trade 335, Picking Through the Scraps, Staying Neutral.
Honestly this is ‘one ugly market’, to paraphrase Arnie in Predator. Vol is ludicrous, but when we’re given lemons we make lemonade:
An almost delta neutral strangle. Selling the 7950 call and 7400 put. We have risk at 7996 and 7354 and can close out any time within the 28 days to expiry. Boring, steady yet it may get spicy and give us a chance to show adjustment.
So the call is now 8.5 and the put 25 -so far so good…..
Trade 336 Plagiarism or Theft?
Sometimes other people’s work serves us well and again a nod to Liz &Jenny of Tasty Trade for the classic Jade Lizard. A credit trade for ±50 with upside risk capped at 50. Here’s the trade: We sell the 7700/7750 call spread for 67-48=19. We also sell the 7450 put for 33. Maths PhDs will note the credit is 52 ….capitalism run rampant! Our risk managers will note the upside risk capped at 50, downside risk is at 7450 minus the credit, so risk at 7398.
For those new to options:
Contact: [email protected] If there is anything you’d like help with, we all started somewhere and yes, it can be baffling.