Trade 84- And, We’re STILL Here

Trade 83- doing OK

Trade 83 was a buy of the 7800 call at 50.5, sell 2x 7900 call at 24.5. This is now trading at a credit of 4.5 to close out. There is no reason to close out or adjust,as the reasons for the trade have not changed. The market had 2 wobbly days last week, but nothing that affects us adversely. In fact I relished last week’s action. I neglected to mention but it should have been obvious,this trade was with July options. Trading in the last week before expiry is a different animal. One I have yet to master.

So….what’s to do? Trade 84 A Sort of Xmas Tree

There are 2 strands but 4 legs to this trade, one reason and a known risk area-but risk is not defined. This is a put trade as premiums are not too awful, but could be better. We are buying (ALL options for July expiry)  7250 put, pay 20 selling 2 of the 7200 puts  17×2=34.This gives us a credit of 14 to go play some place else, and that place is………       

Buying the 7550 put, pay  64  Selling the 7500 put for 51.5= 13.5

The Reason, and The Risk

The reason- ok two reasons, no, make that 3. One, is to capture a down move to the 7550 area, as we own the 50 point spread. Reason two is the trade costs us nothing (14-3.5) Third reason is that we have some  50 point protection for the 7250/ 7200 put ratio spread if the market ever got that far. We have risk at 7150, and could buy that put to convert our ratio spread into a butterfly. So, zero risk there.

This Is Not a High Stakes Big Reward Trade

This is, therefore, an exercise in understanding the relationships between different strikes. We don’t like naked, long or short-the risks are just too horrible for our tastes. You could take a view that the market will tank,and buy a put and be right. Except that the market tanks the day after expiry, or just before when the ATM(at the money )options have almost no value. What we do is simple, when you break it down, it’s the interactions that are complex.

And that is why we love options