Trade 30,Reversing Positions

Terrapin Trader,

Trade 29 – A Monster Winner

That  trade involved buying a call (7300 debit 14.5) and paying for it by selling a put (7050-credit 15). You could have got over 110 for this if you’d been smarter than me at closing out. ROCE over 100% in a week? Great outcome.

Trade 30 Taking the Other Side

Let’s say that the market looks toppy (it has since hitting 7000 in my estimation-feel free to ignore me) 7447 is the previous all time high,and FTSE is now  7436. Believing the market might drop, I like the following combo: Sell the June 7550 call(23) and BUY the 7150 put(22.5). A tiny credit of 0.5

What Does This Mean?

A toppy market needs to be shorted, so you’d buy a cheap put with volatility at fire sale levels. That same thinking says sell a call. We are thus reinforcing the conviction in that trade. In addition as trade29 had such a phenomenal outcome and it was time to close out,consider the reason for closing out

All or Nothing

Our positions can be closed in entirety, or, in part when trading multiple contracts. Keeping a little part of trade29 alive would hedge trade 30.

Caveat: I have no idea where the market is going, and I want to show trade repair when things go wrong. To date the fun trades here have had amazing outcomes. Genius? Nooooo. Chance?  To a degree. Experience? Definitely-and you get it all for free here, with pleasure.

 

Published by Terrapin Trader

First found out about options in 1995.From the arcane magazine Exchange and Mart! First trade- a covered call on VOD in 1999. Made 10%,VOD almost doubled. That's when I realised I was not a good trader,and I was forgiven thanks to the amazing world of exchange traded options

2 Comments

  1. Today that 7550 call is 48.5. I had no time yesterday tpo show an adjustment wbut I will aim to update everyone throughout the week’s moves. After 10 consecutive up days,a new all time high in the face of inflation,and terrible numbers from VOD you have to suspect something is rotten in the state of Denmark.
    again I hope to reveal some of that too

  2. Today you could have closed out for a credit of 14 ( call at 28.5 and 42.5 for the put) You may have got that price or a bit less as the market has been crazy this week
    I was also going to show a helpful adjustment but that can wait for a while-in fact I’m reluctant to share it as it has taken me years to figure it out. Smarter traders may know a few twists here……

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