347 W/e 29Dec The Quiet week, no New Trades .

That Was The Week

Santa paid a visit, the rest is a blur! Likely the scenario for most of us and we do it every year, we don’t need anyone’s permission or approval, it just happens. One of my own quirks, the update/down day count. This year we saw a surfeit of 26 up days. A 10% skew to the upside, which is more than we expect, but we live in ‘different’ times. Last year we only saw a 7% upside skew, but it’s always skewed to the upside. However, money is always looking for a home and there is rather a lot of money looking for better returns, mostly in the US. FTSE this year? Up 2.37%  The S&P500 is a different story, up 24.73%.

How did we do?

No idea but our losing trades were small and infrequent while we had some spicy winners. We certainly beat the FTSE, but THAT is not the point. With options  we look to make reliable frequent returns from a market that is uninspiring, if looking to be long only the index. The only juice in that trade is the healthy dividend payout from a fair few Footsie stocks. So why not trade the S&P? Would you trade an index that smashed up 6.5% in a day? The S&P is in essence 7 stocks, followed like obedient sheep by the other 493, with some minor exceptions. Would you trade an index with only  7 stocks? Dreary old FTSE is more user friendly, we have no currency risk and we keep the same working hours.

However, nothing is set in stone and if the UK becomes any more hostile to options traders we are free to open an account with TastyTrade. ( Always handy to open an account and it does not need to be funded ). Maybe DOW and its options has a similar profile to FTSE. Note to self: Have a look maybe?

Distraction Trades

ADA  was     $0.6066 now $0.6028  drifting lower, have we seen the end of the exuberance?

XRP  was     $0.6168 now $0.6240   A little optimism

DAX    In the thin trading we decided to be on the sidelines and much mince pies.

UK Gilts were   £17.59  now £17.49    Hold my beer!

Legacy trades -Nothing New This week

Trade 346 In the Dire Volatility What Can We Do?

We often overlook calls as puts are the go to trade when Vol is in our favour, but now we are faced with the sole weapon in our armoury-theta. So, it’s a calendar trade whereby we sell near month and buy far month. Here we sell the Jan 7800 call for 29.5 but here’s a twist, we will do a level 7800 call in Feb, and also see how we perform with a 7700/7800 long call spread in Feb.

Those prices: Feb 7700 call 92.5, and Feb 7800 call is 57.5. So the spread costs 35, we sell the Jan 7700 call for 29.5 so our trade costs 5.5. (Risk around 7900)

The standard calendar trade- sell Jan buy Feb costs 57.5-29.5= 28 

Jan 7800 call now 26  Feb 7700 now 95.5 and the Feb 7800 call is 59.5.  So: the spread is now worth 36 minus the Jan call at 26, gives us 10, but we did pay 5.5, small win to date.  Meanwhile:  the regular calendar trade cost 57.5 – 29.5= 28  Now it’s worth 33.5. Of course we run this

Now? Jan 7800 call 52.5, the Feb 7800call  103 =50.5 the trade cost us 28 so a small win.

Last week, the other  choice was to buy the Feb7700call  156.5 and sell the 7800call, now 103, gives us 53.5 against the sold Jan 7800 call at 52.5 gives us 1! We paid 5.5.

Now, Jan 7800 call now 53,5 Feb 7700 call 163, Feb 7800call 105  the level calendar is now 51.5 cost 33.5, so profit 18. The spread credit -5.5.

CORRECTION: Error in initial prices, so the level calendar was 33.5 debit, the jan short/long Feb spread was Debit 10 

[ trade 346  initial prices 7800 Jan call 26  7800 Feb 7800call 59.5  Feb7700call 95.5]

Of course being calendar trades we run them

Trade 347  Silly Putty, or Silly Put Prices?

Going directional after our cheeky Santa rally combination -we sold the put to buy the call, but this time we go the other way- a risk reversal selling the 7800 call for 26 and buying the 7400 put for 27.5. We pay 1.5  and set ourselves in the ‘brace position’ for a bumpy landing!  ( check this out, the call is 7800-7576= 234 points away from the money, the put 7576-7400= 176 ).

Those prices now?  the 7800 call 52.5 and the woeful 7400 put  10.5  So what’s to do as this is a disaster!  It’s such a rubbish trade give seasonality and lack of volatility or any whiff a potential drop. So we can double down or convert our position to  a strangle and simply sell a 7600 put for 35

7800 call 53.5  7400 put 7.5 7600 put 23.5 -so this is a nothing burger as expected. The puts lost more premium, and in this nothing burger week there was er, nothing to trade.



 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.