Discussion Forum

I think historically VIX hasn’t remain so low for a quarter. The VIX cooled down after brexit and since then hasn’t crossed 17!

UK equity options have variable expiries,and US optionsalso vary-some are settled on the Saturday. FTSE options are simple and it’s easy to remember when stuff happens- it took me about4 years of playing around with equity options to figure out that trading is a process of eliminating as much rubbish as you can. And who hasn’t invested in a stock to watch it plummet the next day? We can fix that.

The UK equivalent to VIX is https://www.google.co.uk/finance?q=VFTSE&ei=IBjOVPhV59nBA4vRgIgK

It’s helpful to look back and see the relationship between market dips and volatility. Nobody seems to get scared when markets rise-this is ironic really,as the higher markets go,the more likely they are to fall. Volatility is way too low and markets are, for my money, not reflecting true conditions-but the world always wallpapers over the cracks,until the crack becomes a chasm,then it’s time to capitalise even more while the dumb money sells at the bottom.

Options are complicated but profit and loss are simple concepts- at expiry my sold (short) options are usually ±5% OTM(out of the money)- eg if FTSE= 7000, I might be short puts at 6650 or short calls at 7300 during expiry week,and sleep relatively well. ITM options- example at expiry FTSE= 7000 and I have sold a 7100 put-I would take a loss of 100 minus premium taken in. Just naked selling, however is described as picking up pennies in front of a moving steamroller.
The choices with options are staggering and knowing something of those choices,that is the key. This sets options an entire universe apart from the dreary process of buying shares,or the nerve jangling torture of forex or futures trading. Feel free to challenge that proposition!

Volatility is key to option pricing-and typically it moves opposite to the market. This combo trade will benefit if the market has a quick sharp shock and volatility spikes up in tandem with the put price increasing while the call price shrinks.

COOL STUFF

So what is the trade. What are you buying/selling?

https://www.lovemoney.com/news/56013/property-vs-pension-investment-return?source=10000277&utm_source=newsletter
pensions v property- dumb luck.
Never seen a well managed fund produce anything other than terrible results,but every property I’ve owned has made money- I got lucky with tenants, and that is a lottery

Another way to think of binaries is like a spread-you sell one option and buy another in the same product- example -buy a 6800 put for 50,sell a 6700 put for 20, you now have a binary outcome at expiry- 1. the spread hits its max value of 100(profit=100 minus premium paid,(50-20=30) so you make 70 on a cost of 30, or 2. you lose 30.
But…… we can close out or adjust any old time along the way-that is for another time.
Don’t lose sleep over this…too late, I know you will.

Delta is the rate of change relative to the underlying,and gamma is the rate of change of delta- it is NOT linear. I’m not mad about this trade but I think it will serve to illustrate some valid points -market ‘timing’, choice of weapon, time horizon, opportunity cost.
The logic is sound the choices in my mind are a bit ugly but we can get a’feel’ for how things pan out-and if the market tanks and this trade makes 100, we learn nothing

Every market pundit/commentator will talk about fear and greed-these have to be managed-and I can honestly say my first serious trade(Feb-Mar 2003) stepping into the big time, I made a four figure sum and thought I was on the right track.
My second trade- George ‘Dubya’ Bush went to war with Iraq,and within a few days my losses exceeded that first trade 3 fold. I had sold calls,very cheaply.
Worse still, I went on holiday and had not read the matra ‘buy when there is blood on the streets’. War is great for business-it’s awful I know, but instead of denouncing profits we can do good things with those profits-at no time do we have to lose sight of our humanity. We aim not to make idle boasts-it is only right that we talk about our losses,our mistakes, and fallability-so others can benefit. No question is considered ‘stupid’ here.

Margin- the money or assets that are required to be placed in your brokerage account,against which you can trade,using it as a surety.
This may blow your mind,however……
If you have upside risk like in that particular trade,you could add………downside risk and you most likely will not need to increase margin. In fact the market can only go down to zero but in theory could go up to ∞ (infinity-but no further!)
So…. if you took this one trade,and only this trade for the whole year, you’d make 11%.
Somewhat better than the 1% you’d get on deposit

By the way-what the car salesman did-that is the same as shorting a stock-you sell something you do not own. Now who would do that? Why your very own broker would rent out shares to people who wish to short a stock. Whose shares are they renting out? Why yours of course! And you thought they were lying idle……
FYI- ‘Naked shorting’ is when people have not rented the stock, but have taken a short position-this is not like an exchange traded contract which is what we trade. Naked shorting is no worse than naked longs by the way-and in the US a trader who deposits $10,000 has $20,000 buying power-effectively unfairly increasing the price of stocks, in my view.

Typically traders like to fade moves-so there would be for example a big up move,which fizzles out, then everyone goes short(sells),then when that move runs out of steam,they go long. I have read thousands of words on this type of strategy- I’m still here,where are those guys? I hope they made their fortune, but it’s just not what we do-we have massive advantages which over time will become clear

This is not a trade I would usually take, but if it goes wrong there is always the chance to roll into the next month and wait for the market to come down, and trade adjustment is something that is key to what we try to do,
so next week we’ll see how the trade has done and make plans accordingly

Good one. My trade on Friday – shorted NOV 7350 call for 22.50!

Wow! I never know one could even buy reviews of systems…

Curiously as this trade has gained from today’s movement and in light of recent reserach courtesy of Tasty Trade,this trade made 50-so if you had closed out you would have made the expected 25% return.
Thus- a trade I don’t like has shown that when the profit is there for the taking, grab it with both hands. This trade may go on to make 100, but over time these only have alimited success rate so you might be happy with 25%.