355 W/e23Feb Short Iron Condor? Let's Try.

That Was The Week FTSE was Flat

People tried to buy the FTSE to the Moon, but then reality bit. Intuitive Machines IM 1 landed on the Moon, but toppled over. Aged chipmaker Nvidia became worth $2 trillion, as any stock that has a whiff of AI becomes the hot ticket. Should we be afraid? Yours truly sat through a webinar about the future and the potential of AI. However it begs the question as to why would AI think of things humans had not already thought of? Surely in the world of ‘brainstorming’ SWOT charts and so forth, humanity has covered all the bases? The smart part may be such things as targeted medication, whereby variable micro doses may be far more effective. The medical world may make some huge leaps with AI’s ability to scan images and detect anomalies, as we all live to 100+. So, not much upside really.

Put The Heating on This Summer

So the UK’s utilities will be cheaper this year, but of course not when the demand is high. Natural gas has hit lows, but quite how the price drops filter through is dependent on the way the companies pay for them. It would be churlish to think they don’t use any amount of derivatives as well as spot. Arguably derivatives trading is a help to moderating costs or at least a smoothing effect. We are not the bad guys.

FREEBIE IN LONDON 9th March

Meanwhile here’s a free invitation if anyone can get to Islington 2 weeks from today https://events.masterinvestor.co.uk/master-investor-show/programme/

While it’s unlikely there will be any options vendors, there will be some interesting stands and some excellent talks.

Distraction Trades

ADA was $0.5832 now $0.5888 Another nothing week

XRP was $0.5522 now $0.54628

DAX 2 wins +90, 2 losses -60 one no entry, bit rubbish really

UK Gilts were £16.58 now £16.67 Slow death? Hope not.

Legacy trades from 353 -355

Trade 353 In This Ugly Low Vol Environment

So, this is a contrarian trade going against all the metrics. Trading ATM options is expensive and everything works against you when you buy. We buy a 7600 straddle! Why? February has a reputation for being a bit of a bone shaker, and this moribund market may be due for a big move. So we buy the March 7600 call for 62.5 and the 7600 put for 120.5. We pay 183 and hope the market makes a decisive move. Even if it’s for a day we might get a free ride. Remember Friday is expiry and strange things can happen. (OK they probably won’t and this is an awful trade!)

Best we could do was just over 200 on Tuesday, we won’t run it but will take a look in this March expiry cycle. Tiny WIN!

Running this would be a disaster of course as the chances of a huge move are not zero, but not much >zero!

Trade 354 Rinse and Repeat, Ratio w Calendar

Remember this?

[ Trade 349: We sell February 7750 call and buy the March 7650/7750 call spread. We have a small credit of 6 ]

It was a handsome win but here’s the twist…. We sell the Mar 7650 call for 94 leaving the short 7750 March call and we BUY the Apr 7650/7750 call spread for 51. So we have a nice profit and a new trade.

So now trade 354 is: 38 for the March 7750 call. April 7750 87 April 7650 139.5 Which gives us 14.5 Not bad for a week’ s juiced up theta. The sky is not the limit that would be 100.

Trade 355 SIC Short Iron Condor.

In a nod to another options website/blog, this is a curious trade as it should not work. The presenter claimed it had made more than a strangle or a calendar trade in a week. This is a short iron condor, so we are buying the ATM options and selling the outer wings. We choose April expiry which gives 55 days to be wrong. The trade shown was 49 days from expiry, and the strikes were a little different, but let’s give it a whirl. We buy the April 7700 call and put and sell the 7850 call and 7550 put. Those prices: 111.5+110= 221.5 minus 50+57=107, gives us a debit (ouch!) of 141.5. The prospects of this trade winning are not zero, but flippin’ close. We have a duty to stick our necks out with the occasional howler, and this will probably be a dreadful trade, based mostly on a volatility explosion. That seems unlikely, but then life is full of surprises!