That Was The week
We watched as more verbage gushed from the mouths of our glorious leaders. We remain in the EU. Then, the market shows its utter contempt by going……….. nowhere. We see volatility is crushed virtually to a single digit once again. Central banks are ensuring the smooth running of markets. However, we can argue that all is peachy in the real economy. Thus the naysayers who predicted our demise as a nation may have misread the situation. We are told of the ‘exit’ of £1 trillion from the City. Companies have stockpiled, and the No-deal team has been stood down. So, can we take anything from this to use in our trading?
Volatility -It’s Always About Volatility
Fellow traders know the hard learned rule – sell when vol is high, buy when it’s low. But, mean reverting seems to suggest that vol is just going to skulk along under 10. Meanwhile the market shows little movement but a casual upward direction.
Looking for something to trade into expiry is always vexatious for this trader. We are no longer in the Brexit window so let’s see what’s available. Typically expiry week is very quiet – perhaps one in ten >±1.5%.
See below for the exciting next instalment
Meanwhile, Those Running Trades:
Trade124:Wide winged butterfly Apr puts 7200(long) 7000(shortx2) 6800(long) strikes. A cost of 34 dropped to 3.5, here’s what I did: Used the long 7200s as the lower leg of a butterfly. Thus we redeemed some premium with: Long 7300 put, short 2×7250,giving us a credit of (9.5×2)- 14.5= 4.5. We still may get a blip down to give us some value in the 7300 put. 7300 put =4, & 7250s =2×2. Loss of 29.5
Trade 125 So, we had the 7150/7100 put spread and 7400/7450 call spread. Thus premiums on offer for the put spread 45-34.5=10.5, and for the call spread 28-16.5= 11.5. A total of 22. Currently, the put spread= 0.5, the call spread 27.5.
Trade 126
We entered Wed 03 April for debit 31 (long 2x April 7400 straddles, short 1×7400 May straddle)
Now we have (45.5+18.5) x2=128, against 77.5+88=165.5. So, a further loss of 37.5 against our entry cost of 31. The sole purpose of this was to capture a big move.We knew theta was a killer, though. The VFTSE chart shows what a pile of ¡€#¢∞§¶• we’ve had in the past week.
So, you’d think volatility would smash up on Brexit anxiety. Not a bit of it. I do expect more rage from the government as they lurch from chaos to shambles. Therefore…..nobody cares. Thus another lesson is rammed home. Politics is just a game. Traders with the real money just choose to ignore the noise.
TRADE 127
We’re getting bold for expiry, as premiums are cheap. We buy 7350/ 7300 put spread ( 8-4)=4, but let’s get 7350/7450 call ratio spread 85 -(18×2=36)= 49…… to get 100. We lose money above 7495 and below 7407, below 7300 we get our money back. We have risk at 7550. It’s a nail biter for this week only!
