That Was The Week Possibly the Biggest Drop in VIX History
32%! Sadly my VIX source is offline but in a wafer thin market none of this stuff has any significance. Our remaining 2 trades are doing nicely and while it’s tempting to look back at the year’s trades and the success rate, that is really not relevant. We are about teaching by DOING. Hand on heart, trade selection rarely takes more than a few minutes, some coffee and possibly a generic crunchy nut breakfast cereal. As it’s a week of levity I hope many of you will have seen this https://youtu.be/RsmuUAQ-f7s?si=15yuffP9q0tQLOPg but it’s a very nice summation of the year that was 2024. However global events may soon overtake us as the real crazy begins in a couple of weeks.
Why Trading is Difficult
So, personal take on things as this years has been abysmal personally in my own trading, but I have now reduced the number of ‘missed trades’. Some of these may be due to ambitious pricing or simply seeing things too late, when I’d prepped for the trade entry. FOMO. No, that is gone long ago, and having an itchy trigger finger is something I believe passes for all of us. Buyer’s regret. Well that is something we don’t have to contend with as we can adjust/close out/partially close out. We are not married to a trade. Premature extrication. Closing out too soon. Guilty. However for the few that I have run to expiry and the few I have exited too soon it seems to balance out. Indolence: guilty but cannot be bothered to explain!
My Thoughts on 2025
There will be some chaos, some global events that nobody wants to talk about but options are all about managing risk. So, if we think there’s going to be some big market moves we can take low cost positions with wide Put spreads. Look ahead to the quarterlies March, June, September, December. That’s where the volume is, where the prices are half decent. Look at prices below the 8000 ‘support’ level which may be as fragile as a pre-election promise. To the upside you may fancy selling calls at 9000 but always buy some protection. Enjoy the journey, never stop learning and be profitable. And……… HAPPY NEW YEAR
Distraction Trades
ADA was $0.9608 now $0.8687
XRP was $2.3053 now $2.0612 Buyers still have an appetite for crypto.
DAX : No trades – volume too small.
UK Gilts were £16.11 now£15.99 OUCH! AND THRICE OUCH! This is based on the Vanguard ETF (not a recommendation)
Legacy Trades 394 and 395
Trade394 Too Late for a Dec Position, so………
Risk ON! Let’s get spicy again and look at a very saucy 3×1. We sell 3 8050 puts and buy 1 8300 put. Risk at 7900-7950. Logic of the trade- well purely that the cost is 78.5 minus 24×3 =6.5. The reward is a maximum 250 and while volatility is low, after December expiry the juice will drop put of the Jan options, assuming no catastrophes.
I had wanted to demonstrate a classical Christmas Tree -buy one option, sell 3, missing a strike, then buy 2 further out but not as wide. Example buy 8300 put, sell 3x 8050 puts and buy 2 7850 puts. This would increase the cost by 13 x2,=26, which is ok, but a 500 point drop? We could, at a later date, get further protection that may be better value. We will run this hypothetical position alongside the 3×1
OK- how well did we do? 8300 put 211 and 8050 puts (71×3)= 213 Doubtful anyone saw this shocker of a week, and that ‘expiry’ but we run it. So minus tuppence and it cost us 6.5
The Christmas Tree? 7850 puts 30×2 = 60 -2 so it’s actually been ok. Initial cost 32.5 so we’re good
Our spicy spread: 156 and 35 x3 0r for the Xmas tree we have those 2x 7850 puts at 13.5
So, 156-35×3=51 ( cost 6.5) Xmas tree 51+27=78 ( 32.5) =45.5
Trade395 Something For An Unfathomable Market
Well this goes against the grain but it’s legitimate strategy called a synthetic. We are emulating the underlying instrument with a short put and long call so exactly like the underlying we have a Delta of 1. We sold the 8100 put for 89.5 and bought the 8100 call for 103.5. Honestly this is the polar opposite of my way of trading but it’s Xmas and I have no idea what the immediate future holds. ( With the up day/down day count at 130 up, 118 down there’s still room for a few more up days) Time for a mince pie. HAPPY CHRISTMAS
Now the Call is 112 and Put 48, as suggested we’d have taken anything around 60, and we do not run these. Christmas Eve seemed to have been the peak for this.CLOSED
For those new to options:
https://optionsinvesting.co.uk/special-edition-how-options-work-1/
https://optionsinvesting.co.uk/special-edition-how-options-work-2/
https://optionsinvesting.co.uk/how-options-work-page-3/
Contact: [email protected] If there is anything you’d like help with, we all started somewhere and yes, it can be baffling.
