The Market Continues to Mystify
I have to confess- I usually trade with upside risk about 3% above the market on the basis that it typically goes ‘nowhere’. Since my own trade on 28th December, in 11 trading days the market has risen 3.25%. How has trade 13 fared?
Another Profit Despite The Horrible Odds
So trade 13 was a buy of the Feb 7200 straddle( long call,long put) for 211.5. Today that trade is worth about 220. A tiny profit, but it might be worth hanging on-it has some time left in it yet. However I would not want to book a 4% profit as a winner. I’m not a professional money manager who would take that and then have the year off!
Wither January, Wither the Year
There is a school of thought that says that January’s move indicates the theme for the rest of the year. This may well have been skewed by tax law changes. So what can we do with our trade? Well as previously mooted we could sell the7100 put for 47.5,and sell the 7300 call for84. This reduces our cost basis to :211.5- (47.5+84) =80. So if FTSE stays above 7300 at expiry you’d make 100, minus cost of 80, which is a 25% return. Should FTSE settle around 7200 you’d be sitting on a loss. I’d be inclined to wait for a big moving day which will bump up volatility as this trade is predicated on buying low volatility.( We say ‘vol’ in the options world)
Leave It!
I think this trade is best left to run but like the previous straddle, it has shown that these are good trades(Trade 11 has made 80%+) when you buy them cheap. It’s not hard to see when vol is low. The real question though: How low is low?
