391 W/e 22Nov Glidepath Disrupted, FTSE Bounces

That Was The Week FTSE Didn’t Get The Memo (Everything’s Terrible!)

As the saying goes, there’s no bull market without the banks, so this bank-less rise in the pharmaceutical biotech engineering and media sectors may be a knee jerk. Do they know something we don’t? However volumes are not what they used to be but the bigger picture is £sterling getting walloped. Dropping >6% since September. This has certainly been under my radar, but let’s get to the business in hand. Last week we recommended taking a look at Seasonax.com after their presentation with STA. Perhaps the Santa rally has been pre-empted and bears like yours truly needs to grin and ‘bear it’.

Tasty Trade aficionados may have seen the options champion Tom Sosnoff in London this week. However due to illness this is the second time I have missed his UK appearances, after having dialogue long ago in the early days of TT. Their Youtube channel Tastylive is always worth a look https://www.youtube.com/live/_Udn-yFsqUw?si=fLoCKklVlt29HKdw While they have their detractors their content is generally pretty good and easy to understand. I know that sometimes when we try, we trip over ourselves in explaining trades and get things the wrong way round. Tom and Tony had their hiccups and it is part of options reality. It’s clear in our own heads, but don’t try to explain it in the pub. Seriously!

In the Inbox

Couple of things from trusted sources, first one from the late David Fuller’s partner Eoin Tracy. A bit of a detour from our regular stuff but the free emails are good https://fullertreacymoney.substack.com/p/why-dont-singers-enunciate-and-what?utm_campaign=email-post&r=21hwak&utm_source=substack&utm_medium=email

Webinar next Tuesday from the OptionsInstitute https://cboe.zoom.us/webinar/register/WN_PMkXiGDaT5-MTo7ywTpNtw#/registration

Distraction Trades

ADA was $0.7787 now $1.0659 I believe this may be predicated on Trump’s promise to virtually make it a free for all and crypto as we know is the stuff of regulatory nightmares.

XRP was $1.0651 now $1.5245 Buyers on the rampage. Both cryptos on fire. For a concept that requires no central clearing or exchange it’s unclear why Trump wants America to be the centre of it. (This from someone who tried to buy Bitcoin at $11 and gave up in despair at the bizarre process)

DAX : Last week Friday no trade entries, the rest of the week 2 break evens, 3 wins, 530 nett. This just seems weird, but it’s an old system, and the proof is in the evidence.

UK Gilts were £16.22 now £16.34. With sterling on the sick list you’d imagine there’d be some love for UK debt, it’s not like we are serial defaulters, like some…….

Legacy Trades 389,390 and new kid 391

Trade 389 What Can We Do In Light of the US election? Get Back To Market Normality

The Xmas effect or Santa rally, is it on this time around? Most market watchers know about this and the markets generally rise as the numbers show the economies are doing ok. We will go with a CALL BUTTERFLY

Here’s the trade: We buy the 8300 call for 40. We sell 2x the 8450 call 16 x2, and we buy the 8600 call for 6.5. Our cost therefore: 40+6.5 minus 32= 14.5

The ONLY risk here is our premium paid 14.5

Last week: 30.5, 10.5(x2), 4. Gives us 13.5 Christmas is coming !

8300 call 88, 8450 calls x2 31.5, 8600 call 10 Gives us 88+10 =98, minus 63= 25 We’re in profit but it runs to expiry

Trade390 Can we use Legacy Positions again?

Trade 387 leaves us those two spreads that we own, so we have zero risk and could run them, with one, possibly both making no profit. Or……….

We leave the 8300/8400 call spread for the Santa rally, it’s only worth 15.5 and could make 100.However, the put spread… we sell the 8200 put that we own, for a massive 168.5 and be buy in January the following put spread 8250 216, 8100 137, for 79. So we have a handsome profit(168.5-79= 89.5) still and another spicy calendar ratio trade. Our risk is at 7950 and nothing is set in stone. Santa may not give us the rally this year.

In summary we are long: Dec 8300 call. We are short Dec 8400 call Dec 8100 put. Long Jan 8250 put, short 8100 put.

Here’s the graph of the position https://optioncreator.com/strt35v

This week: The December call spread 88-46= 42 (Remember we inherited this and run it for zero cost). The short put Dec 8100 37.5 our LONG Jan put spread 101-61.5= 39.5. In credit for 2

Trade 391

So, currently we have a long call butterfly, a long call spread and a calendar put ratio spread, shall we try something nuts? Let’s go naked with a strangle.

Here we SELL both a naked put and naked call. It’s not as bad as being naked in one direction and we have simple exit criteria in the event of a problem. IF the premium on one side trebles, we close out and create a new trade relative to the new market level. Tasty Trade have long been advocates of the 1 sigma strangle, which means using options with a Delta around 0.16. It’s simple, we have a plan we take in a credit of 45.5, so if the puts, for example, go to 73.5, we close out. Our loss is 18, we look to place another short put and possibly roll down the call.

Entry criteria? The levels are the most recent extremes of Bollinger bands, the Deltas are around .16, the premiums are decent and we are in the big time decay period <30 days to expiry.