348 W/e 05Jan Happy Trading in 2024

That Was The Week The Good News Was Not Bad News(?)

Welcoming in the new year, as the US gave us the non farm payrolls ‘good news’. courtesy of  https://www.forexfactory.com/calendar

NFPs as they are known, have traditionally been market movers, and Forex Factory gives us a fair chunk of global data along with the First Friday* of the month’s NFPs.


However back in the day -i.e last year and a good few years preceding, bad news was good news and good news was occasionally bad news. Job numbers used to determine the FED’s direction of travel. Example: terrible job numbers, lower interest rates to boost spending.  So, banks in crisis? PRINT MONEY! Thus, one has to wonder what is actually the state of QE, has there really been any tightening? 

The ‘punchbowl’ of excessive debt to GDP is listed here, https://tradingeconomics.com/country-list/government-debt-to-gdp and guess which countries are the real basket cases? Who will have the stomach to remove the punchbowl? We cannot pretend to understand the implications of carrying on or taking the brutal steps. Surely at some point there will be no choice, and the market will decide for us.  So, remember those losing trades you didn’t want to close out? Welcome to the world of global finance. One caveat, the most prudent looking nation by the debt/GDP criteria is Afghanistan!

*Bookmark this if you are prone to forgetting, as it can be critical in trade selection or exiting a dodgy looking position.

Distraction Trades

ADA  was      $0.6028 now $0.5186  dropping lower, have we seen the end of the exuberance?

XRP  was      $0.6240 now $0.56546   A fair bit of downside 

DAX    In the 4 days of thin trading we had one no entry and 3 big wins 60, 80, 150! 

UK Gilts were   £17.49 now £17.08 Ouch! 

Legacy trades -And 348, First Trade of 2024

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 

It’s complicated!

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

Previous 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.

Last week, 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

Now: Jan 7800 call 20.5  Feb: 7700call 118, the 7800 call 69.5. 

Standard calendar 69.5-20.5= 49, minus our debit 33.5 gives us 15.5, the variation- the long Feb spread is worth 48.5, Jan call is 20.5, debit to open 10. Gives us 18 (both WINS)

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 ).

However,hose prices were?  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

So, last time we looked 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.

Thus, the sobering position now, and as we expected, 7800 call 20.5 7400 put 5.5! loss of 15. Had we sold the 7600 put, it’s now 25.  

Overall if closed out now we’d lose 1.5 debit plus (15-10= 5). 6.5 –we’d take that loss but we’ll run it for fun. However experience says when these go belly up almost immediately they never go well.

Trade 348 – A FlutterBy -Far From a Pretty Trade

Yes it’s that time again, we have not had a butterfly for some time. We go for a big juicy 150 points, with a 7600/7750/7900 put butterfly, we will also get really crazy and try a broken wing put butterfly with strikes 7550/7750/7900.     Those prices: 25,86(x2),206, gives us a debit of 59. The broken wing 16.5/ 86(x2), 206= 50.5 and risk of debit plus 50

This is expensive and may be a disaster, in a nutshell because we MUST be right. The journey towards expiry is unlikely to give us a nice exit point.


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