What is going on?
As the FTSE versus £ chart shows there is little correlation with the £ and the FTSE. We have been in a 500 point range all year,with support at 7100 and resistance at 7600. Now that 7600 is one stubborn beast-multiple attempts at it but no further advance. What can this mean? Who knows? But, we can trade this more comfortably with those levels in mind. You may want risk a touch outside these levels.
Getting To The Trade of the Week
We will get there but I just wanted to take this opportunity to thank Tasty Trade for this gem of research:
Regular readers may remember we did a ratio calendar recently which absolutely nailed it. A calendar can mean using the same strikes, or if not-it then becomes a diagonal. Sell more than you buy? It becomes a ratio. Some people like to sell naked very far OTM( out of the money), but this way might enhance profits while mitigating risk. Say you sell options to the value of 20, all you get is…..2o. When you buy something else you can make much better gains. Selling naked is a silly game, which limits profits to small %age.
Alright Already, Trade 59. Put Ratio Spread
I like to use the ‘front’ month whenever I can as it means you can use the next month if needed. Rolling from one month to the next is standard practice. So- my choice for this trade- we are buying the Dec 7250 put for 45.5 and selling 2 of the 7100 puts (21.5×2) =43. Thus we have a tiny debit of 2.5. Risk is where?………. 6950. Comfortable with that? It’s not a calendar though is it? I hear you say! Well it’s a bit of a ‘shot in the dark’ as I think the prices are incorrect, as mentioned in the Week Ending article.
This could be a real monster pay 2.5 to get 150? Are you serious?
cheap low risk trades are not a bad idea-you only need to win 1/10
Trade 59 hit 12 today-you could have left a limit order in at say, 10 and multiplied your money 4 times-but we want 150 don’t we?