Trade 47 into The 3rd Friday of The Month

Terrapin Trader,

 

 Expiry Week Expectations

To the left-the near-the-money strikes, 3rd column in shows settlement prices. The first column either side is open interest.Trade note: the open interest is greatest for 7200 puts and 7500calls. Does this mean anything? I tend to think that the bulk of options are sold as opening trades,and hedged elsewhere by market makers. I therefore suspect the market thinks we will expire above 7200 and below 7500. Can we use this? Let’s find out

Trading with Shares- The Choices

How could we trade any kind of near event for which we had a strong bias? That’s right you can buy shares, but you cannot sell them until you own them. That is seriously going to cramp your style. So to make any kind of meaningful profit when factoring in slippage and commissions, you need a big move in the stock. If you’re wrong it’s going to be nasty.

Cutting to the Chase, What is Trade 47?

Instead of plucking trades out of the air we always consider what is there to be traded. It’s no good being directionally naked if the prices are ugly. This is why options knock the proverbial  seven bells out of all other instruments. So here we are-we want to go long-ish but we don’t want big risk, so we cannot expect massive reward. I like the following call butterfly, which is 100% safe. You can only lose the premium paid and all we are looking for is the value of the lowest strike at expiry.- so long the 7400,sell 2×7450, and long the 7500. Cost? 7400=27, the 7500=2.5, minus the credit for selling the 2x7450s (2×10) gives us a cost of 9.5. Max profit 50. Want to get real cheeky? Sell the 7200 put for 8.(Naked remember-risky but we are in expiry week and open interest speaks volumes-pun intended). Now your cost is 1.5, no upside risk, but the 7200 puts are naked…….

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

3 Comments

  1. Again a trade I’m not over the Moon about but we have to take a position,and if it goes horribly wrong,we’ll fix it.

  2. ANOTHER WINNER- A VERY ACCEPTABLE 17 FOR THE BUTTERFLY MINUS 3 FOR THE SHORT PUTS GIVES YOU A PROFIT OF 14 IN 2 HOURS OF MARKET ACTION. YOU’D HAVE TO BE MAD TO IGNORE OPTIONS-AFTER ALL THE MARKET HAS NO IDEA WHERE IT’S GOING,SO HOW CAN ANYONE ELSE?
    THOSE PRICES -LONG 7400CALL AT 42, SHORT 2X 7450 CALLS AT 14.5, LONG THE 7500CALL AT 4= 17(MINUS 3 FOR THE SHORT 7200 PUT)=14.
    THAT IS £140 PER LOT ON MARGIN OF SAY £1,000. SO A 10 LOT WOULD GIVE YOU £1,400. ONE OF THESE EACH EXPIRY WOULD DO, LEAVING YOU 3 OTHER TRADES FOR THE MONTH. FOREX? THOSE GUYS ARE STILL CRYING ABOUT THE ONE THEY MISSED

  3. Pingback: That Was the Week Ending 22 Sept- Another Yawn : Options Investing

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