Trade 51 I Don’t Believe It! UP, UP and Overvalued.

Terrapin Trader, ,

Trade 50- Another Winner

We made serious coin, buying the straddle, selling the strangles for 19. Closed out for 35. It’s rarely that simple but when it is, we have to grab the money and sit tight. Until the next opportunity. We are not married to the trade and we are seriously indifferent to the underlying FTSE. Remember it’s just a collection of opinions supported by easy credit.

FTSE Overvalued?

I’m such a cynic but when I read financial heavyweights declaring the S&P500 being 32% overvalued, the chart above  gives reason to doubt FTSE’ s lofty position.

Opinions are Just That, Nothing More

The excellent trading coach Van Tharp states that we trade our ‘beliefs’ in the market. I cannot stress how valuable this gem of an insight is. We all have internal bias-and there is in fact a great list of cognitive biases here:

http://uk.businessinsider.com/cognitive-biases-that-affect-decisions-2015-8

I think I have posted this before but it’s well worth a review.  51? What about Trade 51? That’s why you’re here. ALRIGHT ALREADY!

TRADE 51

Taking on the bull, upwards risk, downwards bias. Yes, we just talked about bias. This  may thus go the way of all flesh. We are not aiming to win every week. We just seem to win most weeks.Therefore a nasty trade might make life more interesting.

What Is The Trade?

It’s a ‘combo’ with a twist. We sell twice as many calls as the number of puts we buy. We make ££££ on a down move, but consequently have risk above the short calls at 7650. The logic is that the risk is above the previous high. Volatility is lower than a rattlesnake’s belly. Thus a down move will give us a double whammy.

October FTSE : 7650 short call x2, (6×2=12) long 7350 put (10) Credit of 2. 

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

4 Comments

  2. curiously this trade could be closed out for a credit of 2.5 after getting a credit to open it. You’d need a hefty account to make this pay though.

  3. close of play on friday the 7650 call= 4.5 and 7350 put =3.5- this was really not a trade to sit on. However- next week may be fun as it’s the 30th anniversary of the ’87 crash-which means nothing other than so many traders have never known a serious market event-the heavy bias to the long side rest solely on free money-and sometimes the money tree hits a lean spot

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