Trade122 Week ending 08March

That Was The Week- Not Much To Endear One To FTSE

So…the market drops 3 points but the last 2 down days saw volatility shrink.  We understand this goes against perceived wisdom. Same as stock market versus political turmoil /bond yields/ currencies/ commodities/ gold/ CNBC. So,are there any reliable metrics that can give us clue? Traders may be fooled by randomness,to quote, and the quest to find that unique edge can lead to ruin.

The above stats from this article https://awealthofcommonsense.com/2017/05/the-anatomy-of-market-tops/

FWIW current p/e for the SPX =21.04. Bear markets have also, sometimes, been predicted by recessions– blindingly obvious you’d think. However none of this is even >50% helpful.

What do we have?…………………………………Options and their respective relationships with volatility, and each other. However, traders looking for lack of fair value or mis-pricing may be out of luck as automated trading removes these in a heart beat. Therefore the metrics we find helpful do not need to be up to the nano-second. We calculate the Greeks at our leisure and make considered trades. As an experienced trader, however I can look at an options chain, and get a good idea of what I want to do. Next stage would be the calculations, and possibly a ‘risk graph’, though these can be unreliable.

I enjoy the research that can be found at https://www.tastytrade.com/tt/

You’ll find a rummage through their archives can be enlightening, but I should point out I have zero affiliation. We are only trading the UK market. Tom and Tony are likeable hosts and pitch the presentation at normal people, without the gobbledegook.

Brexit Update

 

Trade 122 and …How Are We Doin’?

Trade 120 the 7200 calendar straddle has lost a bit -we paid 122 now worth 110.Now 128…… No opinion on this really. We trade whatever rubbish the market throws at us. I’d be looking for a rise to 7200 for expiry

I then had Trade 119 call butterfly cost 18 now 17, then……19 again and looking shakey.

Trade 118 iron condor credit 14 cost 4 to close out-now about 2. CLOSE IT,…………..CLOSE IT!!!!!

Trade 121 We bought the Mar 7100 put(69) and were selling 2 of the Mar 7000s(32.5). A  debit of only 69-(32.5)= 4. Now 42.5 and (16.5×2)=9.5. As it’s so cheap I’d run this aiming for 20 or more. The market refuses to drop seriously.Seriously!

Thus to Trade 122 (polar opposite of trade 121)

I like a simple cheap expiry trade,being both simple and decidedly cheap. Caveat: this is not for the faint hearted as short calls can go to infinity and beyond. Traders may wish to avoid the April expiry and capitalise on any mayhem around 29th March. So here we have the 7200/7250 March call ratio spread, for a debit of 2. We are buying the 7200 call for 13.5 and selling 2 of the 7250 calls for 5.5 each. Therefore a debit of 2 Logic of the trade? Solely predicated on 7200 being the expiry target,and anything below 7300 is fine for us. I will talk through the process of trade repair should this go ballistic.

And In Other News

https://www.bbc.co.uk/news/business-47458921

Half a trillion just doesn’t cut the mustard these days. We can never know if QE was a bad idea, but surely accountability was never a bad idea? Whatever happened to Human Responsibilities? The ones which earn those rights?

In Finality,Bear News

Is this as grim as it looks? I wonder if we are setting up for a December style dump.Enjoy!  So, as I said <50% of this stuff is helpful. Thus we let options prices tell us what we need to know to stay safe and profitable.