345 W/e 01DecChristmas is Coming

That Was The Week COP28 Raised Few Expectations

The world records highest ever annual temperatures, sea levels rising as they warm, and ice caps melting. So, can we trust the data? It’s more complicated than we can know and even if the data is horribly wrong, temperature is a real number. Like options, the inputs to price and markets are many and often questionable. And yet we have option prices that are like a temperature reading- a real number. However it is all predicated on belief in money. So, if you have an hour or so it’s well worth checking this out : https://youtu.be/nlni04mpDdg?si=n2NGuLDdem68O4XH

Setting the philosophy aside, we saw FTSE in a coma, but we expected new money to come in and new hope from fund managers gagging for a fat bonus. It’s a tad wrong to disrespect our industry. And, they are as much an input to options prices as the company accounts that hide the bad news. Lacking huge tech stocks in FTSE we are less susceptible to those wild gains, and this somewhat intellectually limited trader is thankful for our dreary little index. Yearly range for us 7,206.82–8,047.06 ( low to high 841) the S&P500? 3,764.49–4,607.07 ( low to high 843 ) However, it’s curious the range might be almost identical numerically* but we are very much out of whack with the US. The S&P was up 10% in November, while FTSE went nowhere. VIX is still AWOL!

*Arithmetically, the FTSE did annual hi-lo average 11% against S&P 20% (or thereabouts)

Distraction Trades

ADA was $0.3898 now $0.3894

XRP was $0.61899 now $0.61242 a nothing week

DAX 3 break evens +30, 1 no entry and 1 win +50 Again the method missed out on huge moves.

UK Gilts were £16.38 now £16.55 up and down, more volatile than anything else around!

Legacy Trades and 345, Something For the Season

Trade 343, December, The New Expiry Month

As we inherit the long put spread Dec 7450/7350, from trade 342 we could close out or do something more interesting. So, we can sell another 7350 put for 31.5 on its own or as a short spread 7350/7250, as we can buy the 7250 put for 19. So we’d have either a put ratio spread, or the latter, a butterfly with zero risk.

How did that pan out? Our prices 7450- 41 7350- 20 7250- 11 So, our choices, close out the put ratio spread for 1 giving us 32.5 – trade 342 only gave us a tiny profit of 12.5 so we can make a quick 20 or carry on. The butterfly gave us a credit of another 12.5, but we run it as it’s currently worth only 12 and it has zero risk.

What to do? The butterfly is now 9.5 the ratio spread gave use an additional 31.5 if it goes to zero we’ve still made £££

Trade 344 Magnetic Strikes ( That’s my idea of Sticky!)

So in lean times we need to find something that is cheap and will hopefully keep us out of mischief. It’s a long Dec put spread 7450/7350 41-20= 21 and there are many ways to help pay for it, but we know things are out of wack with puts trading at volatility in single digits. Let’s sell a strangle, yes it’s naked but with mitigation always from the side not under threat. We sell 7250 put for 11 and 7700 call for 11.5. Credit 1.5 overall

So our downside risk is at 7150 but on the upside it’s still 7700 unless we get creative with our long put

This week: 27-12 for the put spread=15 and the strangle is now 6.5 and 14= 20.5 It’s not looking great.

Trade 345 Do We Buy the BS?

Is a Santa rally on the cards? Let’s say (like those Ancient Alien Theorists)………. yes. We can create a ‘synthetic future’, but we don’t want a brutal delta of 1. So, we sell a 7350 put for 12 and buy a 7700 for 14. We thus have a small debit of 2 and a sold put has positive delta but what do the Greeks tell us? Add those deltas AND that theta! It’s NUTS!