That Was The Week Ending 27July

Going Nowhere

A trader might argue that for strangles straddles and iron condors,this has been a peachy couple of weeks. The FTSE has really gone nowhere. Again. As options traders we always like to have ‘skin in the game’ to take advantage of theta (time decay). The mitigation of risk,however, means that is it generally unwise to sell options when volatility is low. Defining what is low,is a more troubling metric, but recently we have seen VFTSE at 15. Anyone catching that spike may have captured the best premiums.

Wither Goest The Market?

I can boast no skills in technical analysis and have tried to present charts here a few times. I find them helpful but not as helpful as option prices. An options chain can tell you where the major play, is with OI (open interest). For me these indicate key levels that are either ‘buys‘ or ‘sells‘ but we don’t know which ! The 7850 calls show OI of 33239 while the 7900s have OI of 35674. As the name implies these are contracts still in existence-we have to wonder why. The price of the spread has barely moved,so was it a cheap punt? A price of 6 to get 50? Was it a sell, as price has not exceeded 7850. Could both these strikes simply be ‘sells‘?

Personally,as I have quipped before I think OI shows the level where the market is not likely to expire at. So I may be sticking my neck out here by saying that 7850 will not be the August expiry level. I have no TA or predictive skills so let’s not go there!

New Month New Money

Guard against shorting the market when the next tsunami of dumb money hits. These are funds that are chasing the $1 million prize and are prepared to pay $2 million for the privilege. Check out the links below, by the way, some good stuff