How Has This Trade Fared?
It’s a well worn path but you can do a lot worse than a strangle, well managed, on an index.
So this trade, sold for 18 is now 9 (3.5 for the 7550 call and 5.5 for the 6825 put). I would not do this on a stock as a credit trade of any merit. Why, you ask?
I’ve said it many times- surprises. Stocks have always defeated me- my last venture? A uranium stock when everyone was talking up nuclear power. Then…….
Japan was rattled by the powerful March 11 earthquake and tsunami which claimed close to 20,000 lives across swathes of the eastern coast.
Fukushima Daiichi nuclear power plant, 150 miles northeast of Tokyo, was severely damaged by the earthquake and tsunami with its crucial cooling systems knocked out, resulting in a series of explosions, meltdowns – and the world’s worst nuclear accident in 25 years.
A Tragedy for Humanity
My trading losses are trivial and of course bear no comparison to this tragedy, but my investment is now 1/10 of what it was. Imagine if that stock had been optionable and I had written a strangle? The puts would have finished my trading. Don’t short naked options on stocks, please.
Events That Overtake Us
While my disdain for stock options as credit trades remains, there are many events that simply cannot be taken into account. I did not have a catastrophe in mind.I recently had the opportunity to chat informally with a very astute American economist about market moving events such as tech glitches. He gave a wry smile and understated this guy-https://www.youtube.com/watch?v=GiPe1OiKQuk We have to live with the last category but we can trade according to most of this ‘gobbledygook’.
now trading at about 6- again- easy isn’t it? Still sweating on futures or forex? Forget it- nothing comes close to options