That Was The Week America Invaded Greenland( Rather rudely arrived uninvited).
Wow! Talk about doom and gloom. A quick recap of the week’s news and there is nothing positive. We have closures of manufacturing, and retail -even dear old W.H. Smiths is disappearing. Price hikes everywhere, natural disasters, trade wars, along side real wars. We seem to have hit a rich vein of misery. Our bumbling little index is but a tiny player in global finance but we will doubtless feel the effects, if as looks likely, the US will have real problems initially in the stock market and then at the civil level. The media is certainly not reporting what is going on in the US. We, in the UK seem to generate domestic news unfettered by optimism. Yet Spring is here.
Meanwhile in pretty much every facet of making stuff, and innovating, China is progressing in leaps and bounds. China’s engineering projects make the UK look like a pothole riddled banana republic. (I can almost hear the agreement). While it is hard to invest in China and possibly unwise, it’s worth knowing that their challenges to the West’s domination are very real. Chinese electric cars will certainly get a shot in the arm after Mr Musk alienated all the liberals who rabidly supported his green credentials. Problem is, for Musk,China makes the batteries. Tariffs anyone? (actually nobody’s favourite word)
MasterInvestor Show
A precis of the event which is one of the few showcases for the financial world here in the UK. Star of the show as usual was Jim Mellon.
They are always free, informative and thought provoking. Aside from the many companies offering investments our old friends at CBOE were there and actually presenting. And, they now offer European equity options see here: https://www.cboe.com/europe/derivatives/retaileo/ Those of you who follow the blog will know we often link to CBOE for education, they are a force for good. It seems ironic that the options world offers education, the equities world offers… equities.
So here’s a precis of JimMellon’s conversation. 
He produced a pamphlet as it’s 20 years since his thoughtful, and generally ‘spot on’ book. In due course the pamphlet will be online, I believe.
The key takeaways from his talk:
Germany is an analogue economy in a digital world
US debt is unsustainable
He predicted Gold’s rise and still further rises along with silver.
There are some good UK companies making the right noises but there will be struggles. Some insurers, some miners(silver) some AI, and Rolls Royce who could do very well with nuclear power generation with proven tech as used in submarines. London is still the world’s second largest financial market ( my words: and we should cherish that, we may regain the top spot too! )
No mention of the massive political upheavals but a few bright spots, such as emerging markets and Japan along with China. But Jim Mellon is very much worth checking out. As is the organisation MasterInvestor: https://events.masterinvestor.co.uk/master-investor-show/about-the-show/
In The Inbox
An interesting take on some equity options trades with a free booklet here: https://images.jareddillianmoney.com/campaigns/065-options-masterclass/boom-bust-blow-ups.pdf
Whilst this is American it is a salutary tale for those who chase equity options. Good luck and all power to those folk, but here we keep it simple. Because options are hard enough to get your head around
And this: https://www.ivolatility.com/news/3066 You may remember when ‘BTF ‘ was all the rage not so long ago. Buy the f****** dips!
Distraction Trades
ADA was $0.7073 now $0.6843
XRP was $2.3890 now$2.1909
DAX : Another productive week and some learning about better traded management and the platform’s great innovations which don’t help. 4 trades, 1 loser 3 wins nett: 360
UK Gilts were £15.89 now £15.91 This is based on the Vanguard ETF, but maybe this is the ‘sunk cost fallacy’ of having gilts as a back stop which may never happen. Seriously questioning the wisdom, given the economy.
Trade 406 Straddle Versus Strangle(April expiries)
Here’s a bit of fun and each week we’ll update what’s winning and what isn’t. So….. the 8650 straddle: call 119.5 and put 132.5 =252. Strangle: 8900 call 30.5 8200 put 29. To keep premiums level we sell 4 strangles against 1 straddle, which then gives us 252 against 238
Remember we use: https://www.cmegroup.com/tools-information/quikstrike/options-calculator.html
What’s YOUR prediction?
Strangle: 8900 call 21, 8200 put 19.( credit 59.5 -40= 19.5) The straddle 110.5 and 106.5 (credit 252- 217= 35)
However: We sold 4 strangles, so that gives us 19×4= 76, trouncing the straddle
This week: 8900 call, 12 8200 put, 10 Profit: 59.5-22= 37.5×4 =150 8650 straddle 95+83.5 Profit: 252- 178.5= 73.5
It’s not even April and the strangle has done brilliantly. We’d take that and close out, but the straddle struggles to keep up. Given the multiple strangles this is no surprise.
Trade 407 Building On A Legacy
With trade 405 we inherited a juicy long put spread 8800/8650 so let’s have fun morphing this into something more interesting than banking a plain vanilla 70. We get spicy and sell another 8650 put for 106.5. ( Much more interesting than 70!) Let’s add some downside protection too. We have risk at 8500, so let’s buy that put for 57 and sell 2×8350 puts (31.5×2) a credit 6
We now have risk at 8350 and a war chest of 106.5+6= 112.5 should we need to adjust
The 8800/8650 spread is now 169.5, 83.5= 86. The long 8500 put is 38.5, and the short 8350 puts are 18.5×2, gives us a credit of 1.5 -Is it all going too well?
Trade408
KISS….. Keep It Simple, Stupid! I need no reminders of my own stupidity (who manages to tip cornflakes into their empty coffee mug?) We are getting concerned about the market taking a dive but don’t want too much upside risk. As always we don’t want to pay for a trade. We go with a risk reversal selling the call and buying a put. Sell 8800 call 31.5 and buy 8450 put f0r 30. Credit 1.5
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.
TRADE 408 made 35. 8800 call 16, 8450 put 51. These were my stock in trade trades in 2008. Quick turn around.