Those trades- sell the 6250 call, buy the 6550put(trade 3) and 6450put(trade 2). The conservative outcome was that the 6250 call,which we had sold, dropped to 5, while the 655o put hit 13,and the 6450 put hit 8,so for an entry price of zero this is ok,but of course we needed margin.Maybe £1,200, so we made £30,and £80(8-5,13-5 at £10 a point) Not a great outcome, ( £110 profit on £2,400 margin= 4.6% in 2 weeks,annualised= >200%) To be honest I’d hoped for some volatility in the market,hence the above link to VFTSE(volatility of the FTSE thanks to Goggle finance).
The logic behind the trade as previously explained- we took a view that FTSE100 was high,but would not be likely to hit 6250. Had it done so I could have shown a few ways to adjust the trade. Our aim is always to avoid losses.
It is not important that you know the names of the many strategies-though we have a shorthand, in the same way as music has a written language.It is vital what you are doing when you enter an order. The US and the UK have different ways of expressing things. To quote Oscar Wilde ” We have everything in common except language”
This trade introduced for the first time the combination of options, and is a way of juicing up a directional trade and reducing costs.We will go on to show a variety of strategies, not with fantasy prices but with real market prices. Unless we show things in real time it is hard to understand the concepts.
Was this a good trade? Look at the volatility neither high nor low-very hard to trade this as volatility is our guide. We are choosing trades to ease our gentle readers into the mindset of options trading. There will be trades that go wrong. We will try to find some.
