337 W/e 06Oct US Chaos, China Crisis?

That Was The Week Breath Was Held for Non Farm Payrolls

So, the widely watched non farm payrolls report was very positive, and you doubtless take it with a pinch of salt. However if they use the same method to fudge the numbers, then surely the fluctuations would be legit, one might surmise. Good job numbers in the past meant the FED might raise. However now it’s inflation that rules the FED. We simply ride the coat tails of the world’s largest economy.

Coming in at number two, China again this week went bonkers with real estate nonsense https://www.bbc.co.uk/news/business-66991326  Evergrande again- shares start trading, go to the Moon, then cease……. just have a read. China is still an enigma shrouded in mystery wrapped in a riddle.

Washington and New York saw more self inflicted chaos, as the speaker Kevin McCarthy is gone, and Trump ‘ran’ away after 2.5 days in court. He may rue the day he hired comedy lawyers! He also dropped his lawsuit against his former lawyer Michael Cohen who served serious prison time for his former boss. Cohen can now go after Trump for that frivolous malicious suit. Republicans are  STILL in thrall to Trump. It’s comedy but serious too.


So we have chaos in economies numbers one and two. How about Europe? Nothing to write home about, even if post-Brexit we could live there anyway! Seems that alternating forest fires and floods are creating real damage in southern Europe, record temperature rises again are in the news. It’s ALL a bit grim. However we have Cricket World Cup Rugby World Cup, Gymnastics World Championships, Formula 1 and I believe there has been some golf (it’s not really a sport is it!)

Philosophy Corner, Legendary Trader Larry Williams

So again, Larry was mentioned in one of the various emails received each week. You may already know: Larry Williams turned $10,000 into $1,100,000 in a futures trading competition. Futures are either…….. you’re right or you’re wrong. The people on the other side of Larry’s trades were wrong. With options we can be sort of right, sort of wrong, maybe next month. Or, we can be absolutists, buy puts when the market’s going up- we’re wrong. Trade strategies and we’re mostly sort of right. Having tried for a few years to trade futures and forex, to date I have only made consistent profits with options. I made consistent losses with futures and forex with the occasional glimmer of hope with a big win. Readers know my DAX trades just about scratch a profit, so let’s stick with the warm cosy complex world of options.

I meant to post this last week, but it’s still relevant: https://uk.investing.com/analysis/yield-curve-keeps-sending-message-investors-should-not-ignore-200590462  Apparently there have never been soft landings! A stair-stepping market, however works very well for us.

Distraction Trades

ADA $0.2602  Is anyone still paying attention to the minor cryptos?

XRP $0.52268

DAX 4(four) No entries one win +60. As if to confirm my own doubts about trading a 5 minute chart

UK Gilts £15.96 from £16.14 These are NOT going in the right direction.


Legacy Trades: 333 – 336 and new trade  337

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. * Has not performed well but it’s 100% safe and the butterfly  has some value: 15 (06Oct)

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. A tad underwater (06Oct)

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. Now worth about 16(06Oct)

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

First 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 was  57.5 and 33 = 24.5 Another nothing week no particular advantage, but we’re in healthy profit

This week: 103.5 and 57= 46.5  – Close out and be happy, say I. Of course we run to expiry for fun. WIN!

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…..

Now(06Oct)  1.5 and 41 and another shining example of why I don’t like strangles

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.

Ouch! now 18.5 and 11.5 = 7 for the call spread  and the put….. 57 So we are nursing a loss, but wait…. we are not futures traders we have options, and a credit of 52.

Trade337 Time for a Curate’s Egg! When Vol is vile, we improvise

I don’t like these prices for calendar spreads, I don’t like the low volatility. (Amazing that the financial press bang on about volaitlity when there is none). So we combine a short call for premium, and a put ratio spread for no money. We sell 7700 call for 18.5 and (buy the 7400 and sell 2×7300s) giving us the 7400/7300 put ratio spread for 41 and 20.5(x2). Keen observers will see we only take in premium for the call. Logic of the trade? Should the call come under pressure we can adjust on the put side, should we see downside pressure, we can adjust and have the 18.5 credit to help out. And yes, I still don’t like naked short options…… in isolation.

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.