364 W/e 10May FTSE MELTUP (Again)

That Was The Week FTSE Went Postal…. Again

So, as previously stated here, I was caught horribly short a FTSE that is on fire. Quite why suddenly it’s ‘cheap’ is a mystery. However, I have my own theories and none of them exonerate our financial sector. We all know we are ‘banksterised’ by an effective cartel and regulation is at best, shoddy from my experiences and beliefs. Yes, there are leveraged ETFs and yes, it’s a new tax year. So, using my back of the fag packet analysis the following was found for the last 20 years. March 10 up 10 down, Apr 16 up 4 down, May 11 up 9 down. Anyone see a pattern here? I didn’t!

It should be fairly plain that new money does seem to make its way into the market in April 75% of the time. However nothing is a ‘given’. Yours truly has, for many years, regarded ‘seasonality’ as a factor to bear in mind. But, and it’s a big BUT, the biggest factor is …… randomness. Banks go bust, dodgy accounting gets found out, governments continue to prove incompetence is ever present. Though, not to be confused with malice, which in fact, requires competence!

I have often confessed to bias, and consider the financial sector to be untrustworthy to some degree. Crooks seem to find financial scams anew just about every other week. Predators abound in our world, though it makes more sense to extort money rather than say, avocados. If you’re interested in challenging the status quo, the esteemed Paul Carlier is a champion for the truth. He has been in a battle with the FCA whose mandate is ‘ the smooth operation of markets’ . I believe deserves our support. https://twitter.com/Carlier_J87 And here https://www.jupiter87.com

In Other News

So, Rishi Rich proclaims we have ‘turned a corner’ and come out of recession. I find it hard to believe a) We were in recession, b) We have a buoyant economy. However when in the pub, it’s simply bad manners to enquire how much it is before buying a pint. And yes it’s between £7.50-£11 deepening on which part of London you happen to have a thirst. We all deserve a pint, it should be on the NHS! We just have to skimp on food, travel, housing costs, and clothing. I think it’s maybe not a great time to own a shop or a non-‘gastro’ pub. And, apparently a second hand car business called Carvana, Cazoo, Carzam and Cinch. So, perhaps that business model is tainted by having a name beginning with ‘C’! I can spot the trend!

We note, in an ironic twist, the FCA are actually accusing the motor trade of overcharging with high interest, and as many car makers know, it’s best to be a credit provider with a car factory. Thus money is better at making money than making cars. I have never liked the idea of financing a new car, as it is not an asset, it’s a liability with some utility. Motorists get a raw deal, but FCA may have chosen a soft target.

Distraction Trades

ADA was $o.4682 now $0.4439

XRP was $0.5321 now $0.5032 Finding and holding on to its lost superiority over Cardano?

DAX Woe and thrice woe! 4 no entries, one loss-30. Another week of trading I’d like to forget

UK Gilts were £16.53 now £16.66 Ugh! Interest rates may not be going anywhere for a while yet, a tiny improvement. One day……….

Legacy Trades 362, 363 and new kid 364

Trade 362 -Could We find Something Novel?

So, an interesting feature of the CME calculator is being able to plug in the price of a straddle. So what’s the idea here? Let’s try the curious 3 x2 ratio calendar straddle trade. Those with a long memory will recall this is an allegedly highly successful trade as invented by a Dr. Singh. A huge caveat: I have not discovered the entry criteria for this trade, but you may recall we buy 3 near month and sell 2 of the far month straddles. The theory is that while theta is ugly against us, Gamma and therefore delta are in our favour so any big move should produce a decent profit. In effect this trade is a free ride with a straddle. The numbers: 173×3= 519, 2x 277= 554. We therefore take in a credit of 554-519= 25.

However, this is not free money as we have to buy back the entire position when and if it makes money.

https://www.cmegroup.com/tools-information/quikstrike/options-calculator.html

Previously: Very ugly and I suspect the problem is with the choice of May/June as opposed to say June/July, in addition to the market ‘s upwards move. (NO!) We have 140 for May straddle and 261 for June. So, mix it all up and we have a loss of 102. Minus our credit 25

Now: Er, what? May straddle 281 x3, June: 366×2. Gives us closing out price 843-732= 111. PLUS opening credit 25, gives us 136 WIIIIIN!!!!!!!!!

You could argue that you’d simply be better off buying 8150 calls, but where’s the fun? Honestly I expected this to be rubbish as the likelihood of a big drop was so low. I did not expect this melt up, again.

Trade363 Can we Find something not totally rubbish?

It’s unseasonal but it’s a pitchfork!

Ok so here’s the trade, and everything is wrong about this which might serve us well. We sell one call and 3 puts at the strike which is the value of the ATM straddle subtracted from the ATM (Futures) price, 8256. This gives us nothing much in the call but the put is all extrinsic value, ie if the put options expired today, they’d have no value.

We take in the premiums 271.5+ 50.5×3= 423. The dream is….. the market at 7700- 8300 for June expiry, ideally at exactly 8000!

Now 466.5 and 18.5 x3 – not unexpected and those puts seem to be heading towards zero. Loss 0f 43 + those puts

Trade 364 Back to The Knitting

So, it’s too late to use the May expiry, but June is well within the parameters (<45 days to expiry) and we again choose a ratio spread, which is a firm favourite here. However there’s a twist and a fellow trader has done a lot of homework and come up with the following. Subtract the value of the ATM straddle (8450 for our purposes) gives us ± 8200, and that is where we write the short puts. And for the longs we go 100 points above, giving us 8300/8200 put ratio. Those premiums? 41×2= 82, and 62.5. Earth shattering credit it is not, but it may be in the ballpark for the long spread to produce the goods- a max 100. Risk below 8100. We must endure such horribly, absurdly low prices for now.