Trade11 Update

Terrapin Trader,

Never/Always Add to a Losing Trade

Previously this trade had been entered for 181.5, we could then have bought more at 164. Our buy price is now 172.75. Today the trade is worth  178. We could close out for a tiny profit of 5 on our stake of 172.75,that is still almost 3%.

Reasons to be Cheerful and Close Out

A tiny profit is still a profit but you’d only take it if you could do something better with the money. Can anyone see a better trade? I’m still looking at some very cheap puts and maybe buying a put spread would be a prudent thing to do. What will move the market in our favour? What if nothing happens? As always keep costs low. I hate to pay for anything so there may be some juicy prices in the options chain. There are still 23 days to expiry:

What Do Those Prices Tell You?

The 7000 put(Jan prices) has dropped as the market has risen. Does that make it cheap? You could buy it for around 39 and then…….. sell the 6900 put for about 22. The most you could make for your buy price,is 100-17=83. There is no margin required, so this one trade could make almost 500%. That’s a great return if it works out. What’s the exit strategy? Close out if the trade goes against you at what level? Morph the trade into something else to regain some premium? Double up? Close out if the trade hits say 40,and you have doubled your money? Managing exits is like managing expectations. You have to be realistic,and these prices are low for a reason. There is a planet sized amount of ‘dumb money’ just waiting to grease the palms of those brokers.

Trade smart, always have a reason for the trade and when things change, make choices.

 

 

 

 

 

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. The trade is into profit at 180 now- of course we could close out half the trade, but we had the chance to buy at 164 which was lucky. This has 3 weeks to go though….

  2. latest prices for the straddle- 147.50 for the call and 39.50 for the put=187, so as our second tranche was closed out leaving a buy price of 166, this is a good profit of 21 (21/166=12.6%) All in a day. Super low risk and nice little turn around even if we’d stuck with the original buy price at 181.5. This is NOT the ‘swing for the fences’ trade-we don’t do that, and the only way that can happen is by buying very cheap puts before a market crash. Yes there are 10,000% opportunities.

    1. Today 221.5-patience is a virtue and it looks like I missed the peak at >7200 which probably meant about 230

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