371 W/e 28jun FTSE Wobbles: Election Fears?

That Was The Week UK and US Leaders Went Head To Head Badly

So readers know that politics is relevant to us only for the effect on the index, but our FTSE is subject to the vagaries of global events more than domestic. However some insights this trader had no idea about, are you sitting down? UK pension funds only own about 4% of the UK market from 40% a few years ago. Insurance companies own UK shares and there is a fair chunk of inward investment from global participants. However it is a concern, and maybe explains some of the bizarre moves upwards! See here: https://www.ondra.com/assets/pdfs/Britainplc_131023.pdf

Apologies if the associated PDF is gloomy but we’re not flag waving for the stock market we just trade it. There is a curious irony in that Theice.com report increasing options volumes yet those are not reflected in the FTSE open interest

There’s nothing to report in calls as regards any outstanding Open Interest. So where’s all the action? It’s not in FTSE, and it seems people are making public offerings on other exchanges rather than London. The logic of listing elsewhere is plain- you get more money. Now if I’d worked hard to develop a business to the point of going public would I choose loyalty over 2-3 times the amount of cash? FTSE PER is currently – see here how badly it compares to S&P500 https://markets.ft.com/data/indices/tearsheet/summary?s=UKX.P:FSI

Politics and Trading

There seems to be a dearth of doom merchants as politics and elections seem hardly to affect the markets. The advice I’ve seen says stick with it, stay invested and the wrinkles iron out over time. You can argue the same with options, if you’re delta neutral, however big moves generally mean losses either way. Fingers crossed our election as a big nothing burger. America not so much but it’s thought whoever gets in will start spending. It’s going to get crazy before that, in my own personal view. (Remind me in November)

Distraction Trades

ADA was $0.3762 now $0.3971

XRP was $0.4855 now $04764 a small dip while Cardano gets a bit of love

DAX 4 no entries, 1 win +100 Hard to remember if this has happened before, maybe once.

UK Gilts were £16.72 now £16.61 Hard to contain my disinterest!

Legacy Trades and 371

Trade369 New Expiry Month Looms as June expires Fri 21st

So, while we are utterly bereft of clues about the market should we try another strangle? Not the trade of choice but it’s hard to see what might work well and July expiry is only 34 days hence. Thus we go with the same strikes as Trade 368. Therefore we are saying we think/believe FTSE will find support higher than 7900 and resistance below 8500. We collect 39.5 for the put and 19.5 for the call We therefore collect 59 and sit on our hands for 33 and a bit days. Apologies if it’s a bit beige but we’ll try something a bit feisty next time.

With not a lot going on with volatility we now have prices: 15 and 20.5=35.5 we collected 59 a great outcome as theta took chunks out of premiums. Yes you could do this whilst lying shipwrecked and comatose drinking fresh mango juice. (Nod to Howard Goodall)

This week: 14.5 for the 7900 put and 6.5 for the 8500 call Yowser! Gives us a very nice return as we sold for 59

Trade 370 Ladder Not Laddish

Let’s kick the beige into touch and sell a ton of premium and see where it leads us. We use July expiries: buy: 8500 put, 248 sell 2x 8300 puts 110.5×2= 221, buy 8150 put, 53.5, sell 2x 8000 puts 24.5×2= 49

Thus we have a cost of 248+53.5. – (221+49)= 31.5 Logic of the trade? We buy a juicy in the money put spread, we have no upside risk other than the cost 31.5 Downside is a tad skewed giving us a lot of wiggle room just below 8000

This week: 316.5, 148.5×2, 67, 26.5×2 . We have 316.5+67= 383.5 long premium. Short premium: 148.5×2= 297, 26.5×2=53=350. We are in credit to the tune of 33.5(we paid 31.5)

Trade371 A Trade for Election Week ( The US has some kind of holiday on 4th July)

This is disturbing, while not exactly at the money this straddle has call Vol at 13.01% and the put at 9.71% So what’s the take away? Nobody wants to buy puts? Everyone wants to pay too much for calls? It’s a very cheap straddle with an overpriced call. We choose a Tasty Trade Liz and Jennie ‘Big Lizard’. Sell the straddle buy an out of the money call. We buy the 8250 call for 55. Gives us 173-55=118.