That Was The Week We Saw More Crazy
When the court jester becomes king, the kingdom becomes a clown show. An apposite quote that of course was aimed at you know who. Right thinking people know what a bad idea this whole farce has been. Putin knew it was all his birthdays at once. The world knows what an utter toddler tantrum the US has become once again. So, I have no downside risk. Enuff said
NFPs! Non farm payrolls the event for which we all hold our breath was a bit of a nothing https://www.forexfactory.com/calendar This is a great free resource in case you don’t already know it. So, the first Friday of the month, we await the payrolls but there are other economic measures that can be helpful. We have all become inflation hounds, awaiting the various numbers, domestic and foreign. Our main metric, VIX had a busy week up 20% this week with some considerable buying coming into the market on Friday and FTSE futures melting up late in the day. We are now seeing massive pre and after market moves in the futures which seem to be more the driver than the passenger.
In The Inbox
While I admit I have viewed some of their choices with skepticism SJ do some interesting work. Their latest was about the 112 against naked puts. Basically the 112 is one long, 3 short puts, and as they show, these can get ugly quickly. And this ratio of 3×1 seems to be a potent mix of big reward, dire risk. However I have done this on occasion to secure a long put exposure while selling 3 puts very far out of the money, a 500 point wide margin of error. There are many more vids, so grab a bag of peanuts and a cuppa and dig in
https://www.youtube.com/user/sjoptions
We have comms with industry insiders from time to time and I was pleasantly reminded of our chums at https://optionsdesk.com Their service can offer a guiding hand and they are a very decent bunch. However it seems everyone wants to trade the US market and use platforms with a gazillion bells and whistles. Each to their own but it’s taken me a month to get moderately comfortable with generating a deal ticket on the platform we use for DAX trades. Frankly, for my needs, 95% of the stuff is just a distraction. Like most older traders I’ve tried all the indicators and settings and found them wanting. Trading is art and science and it will always be imperfect, unless we are quantum powered AI algo’s which will probably end us all!
Distraction Trades
ADA was $0.6325 now $0.8104
XRP was $2.1565 now $2.3444 If Trump gets his trotters further into crypto, it may not go well. The US government has made $$$ from the Bitcoin seized as proceeds of crime.
DAX : 2 days no entry, 2 losers 2 wins nett 540
UK Gilts were £16.20 now £16.05 This is based on the Vanguard ETF (not a recommendation)
Legacy Trades and All New Trade 405
Trade 396 Calendar/Time Spreads( Running Having Rolled )
Expiry at 8685 gave us 485, and 385×2= 285 LOSS
Dare we roll? We are here to educate by doing so here we go: Rolling to March 8200/ 8300 would give us 273.5, so we have a rather ugly cost of 11.5.
Now –Yikes! 596 and 498.5×2= 401. This is purely for academic purpose and we would not suggest/recommend or in any way approve of such action/inaction. However to see how this pans out we will run it.
This week 497 and 401×2= 303. So it’s an improvement but horribly deep in the money, we’ll keep it going and rolling purely for punishment!
Trade 401
We went with the esteemed Professor’s straddle, and February worked well, remember .Now we have:
Previous week : March: 8700 call 71, 8700 put 124.5 Our initial credit was 239 thus we have 239-(71+124.5), gives us 44.5 WIN
Last Week: 8700 call 142 8700 put 51.5 =193.5 (initial; credit 239) 45.5 still winning
This week 8700 call 74 and 8700 put 86.5 =160.5 (Winning as initial credit was 239) WIN 78.5
Trade 402 We Use March Prices
An old chestnut and a safe trade with fair chance of doing ok. It’s the iron condor. We sell both side of the market but with short spreads. So the prices nearer the money are the options we sold. And here we choose 50 point spreads. Calls: short 8850, 47, long 8900, 34.5. Puts: short 8550, 59, long 8500 47.5. So as a credit trade we take in 12.5 for the calls and 11.5 for the puts. We take in 24 and our risk is 50-the 24 credit It is a dull trade with limited potential as it ideally needs to see both sides at expiry got to zero, avoiding costly commissions.
However there is an ex-Harvard man, Jared somebody, who made his first $million in his early 20s with these. He may still be in the same business, but these went pear shaped for a while as risk/reward no longer stacked up.
Calls: 8850 25, 8900 17 = 8, Puts 8550 62 8500 49= 13. Rather uninspiring, but ok.
Was : calls 57, 39.5= 17.5 puts 23,18=5 Gives us 22.5 (initial credit 24)
Now calls 19.5, 11 = 8.5, puts 39,31= 8. 16.5 against credit 24 Boring and a bit ugly
Trade 403 How to be Bulletproof For Next to Nothing(March Expiry)
Futures point to a very likely drop on Monday but we have Friday’s prices as always. So, swings and roundabouts, we place the trade which is a ladder/condor/Xmas tree. It’s a combination of 2 ratio spreads as follows: Long 8600 put 78.5, short x2 8450 put 39.5, long 8300 put 22, short x2 8000 put 9.5. Here’s the arithmetic: 78.5+ 22, minus (39.5+9.5 x2)= 2.5.
So for a cost of 2.5 we get nice downside exposure at 8600 and risk is very far away at 8000. These kind of trades have a very wide profit range no upside risk but possibly only a moderate chance of profit.
Those prices were 29.5, 14.5×2 and 9, 5×2. This gives us overall minus 0.5 Early doors
Now 50.5,- (24.5×2), 14.5 -(10.5×2) = Minus 5
Trade 404
Fuelling the bear position, remember? https://worldperatio.com/area/united-kingdom/
What if we decide to get short with a short call and a long put spread? 8900 call 39.5 long the 8800 put and short the 8700 put 89.5, 51.5 =38. We have 1.5 Credit and a massive dose of ‘Hopium’. I doubt this is a good trade given the epic run of the Western stock markets, but let’s view it as a bit of downside protection, with maximum reward 101.5.
Now 8900 call 11, 8800 put 144.5, 8700 put 86.5 Gives us 58-11= 47.(1.5credit at open) WIN Almost 50% of max reward, we’d close out. Run…for fun
Trade 405 Time to Get a Calendar Trade
We are selling the March 8650 put for 66, and buying the April 8800 put 196 and selling the 8650, 123. Thus we have a long spread in April with max reward 150. This is a small debit trade, we pay 73-66= 7.
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.
