Trade 41 a Bias To the Downside

Terrapin Trader,

Last Week’s Trade 40

Netted a 25% return – a long straddle bought for 138– you know the rest. You read the week’s summary. I know you did!

Time to Mix it Up With Something New

We seem stuck in a range roughly 7350-7500, how can we use this? Let’s mix it up with a’ broken wing’ butterfly. This is where the protective wing is not at the usual strike but another strike further out. This gives us slightly more risky but cheaper trades. (Focus on the risk, not the reward). That will come. So here’s how the trades look: The strikes first, then prices-remember we sell the body,(2 of the middle strikes) and buy the wings

7400/7300/7100 broken wing put  butterfly  prices    118, 62(x2), 16.5= 10.5 debit

7200/7300/7500 call broken wing  butterfly  prices   137.5, 68.5(x2), 6.5.= 7 debit

In summary we can buy either or both, if we believe the market will  stay in the range of 7200 -7500

The Put trade makes max profit 100 at 7300,break even at 7200  loss above 7400, loss below 7200, and adjustment needed thereafter

The Call trade makes max profit 100  at 7300, break even at 7400(minus costs), incurring a loss below 7200 and adjustment needed above 7500. Let’s buy both, for fun. This is,therefore, for demonstration purposes only. I would always pick one or the other, as the outcomes here are too close- requiring the market to be around 7200-7300. The call trade is therefore safer in the event of a big drop. Try some other strikes if this inspires you.

We Are All Doomed Anyway

Thanks to the site ‘Elite Trader’ one of my fellow doom merchants posted this:

http://www.econmatters.com/2017/06/a-totally-rigged-market-with-world.html

Are we all being taken for a ride? Does it matter as we have no real power?

 

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. Thought I’d commented already on these- the put BWB has come back to small profit,now about 16,buy price was 10.5
    The calls- a modest loss of about 40- could be mitigatedwith a strangle with only 8 days to expiry and biiig theta.

  2. so now the put trade is worth about 20, the calls- cannot get prices but likely a break even,and a wake up- do not trade when ill!

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