Dick for a Tick!

I was poised somewhat tentatively to place a combo- risk reversal as usual- selling 4450 calls to buy 4000 puts- May series, and put in a price of a credit of 2. It must have teetered on 1.5 a couple of times, and I didn't want to chase the trade, as I am still out of sorts, but it would have been perfect with Dow now negative, I could have run the trade or taken a profit of 12 per lot.
These are like futures trades but you don't get smashed to bits by volatility, so sometimes futures trades are stopped out when right on the trade, correct in your stop position but some genius decides to take everyone's stops out. there is no answer to that as futures traders will attest, it's just the 'rent on the shop' but with our option combos we can make nice stress free trades-especially as I have now figured out what to do when a combo goes horribly against you. (price of this info? £25K)

Market Moved by Idiots

Laughed out loud as I read on Yahoo that RBS had 'upgraded' banks and said they were all going to make a profit.
This coming for the world's most stupid bank-they are utter utter morons in my opinion, and even the directors are as ignorant as that variety of 'flu that is no longer a serious threat! Too stupid to understand options.
They are not even mental midgets, they are intellectual vacuums.
So when the horse's backside says something you have to take the opposite view. Caveat- Brown is owned by the banks and will now and forever more do their bidding, so RBS's particular piece of genius comes on the back of a banking sector that is positively foaming at the mouth with all that delicious cash. Obama of course is also the stooge of the US banks and his boy Geithner is in a spot of bother over some 'plain brown envelopes' I understand.(Allegedly)
Trading is one thing, but our own dignity is another matter and I feel that the banks have repeatedly raped the British public- maybe it's the same for the US, and still there is no whisper of punishment for their evil doings. Me and Taleb are mad as hell about it!

Pre- Conceived Ideas

Rec'd a timely email about this, and it is of course sheer folly to have fixed ideas about where the market is going, we can only trade based on our own interpretation of the true information available. The only true information is the last price of something as denoted on a chart, everything else is just someone's truth or another's lies.
So when the market goes up, I should be more willing to go with the flow but at times it makes me feel ill just to see the F soaring, because my heart tells me it is another illusion, but my head doesn't often overrule that notion. I shouldn't care what sort of money is buying the market-( the vilest numpties in the world probably) it is simply a market move and is tradeable.
So preconceived ideas must be relegated to my taste in wine, music and cars.

Closed out

Well the market reacted to something,but I don't think it was the 'flu- a drop was in order as the oil companies disappoint, but still no clues as to where we are headed. Anyway closed out those calls for 29 thus making 13 per lot. Could have got a better price,and even looked at a combo- sell puts to buy calls which was not a bad trade as the Dow scooted up after opening down about 70- the F rallied by 50 or so-but of course the market is looking 6 months ahead and is in no way influenced by whatever the Americans are doing- which in turn is governed by the amount of TARP.
According to Nassim Taleb the banks have lost $4trillion and change which is more money than they have ever made- this was hotly disputed by a fellow poster on Motley Fool,who seems to work for a bank, but is a very smart guy. I guess he is duty bound to talk up the banks- Taleb says let 'em rot, we don't need them anyway, which is my stance. Mutuals and credit unions seem to work fine for retail banking, and who knows what banks do with their obscene profits anyway? Barclays used to be the big Satan, but I don't think any of them occupy the moral high ground-especially the one that started the toxic asset scam-and they know who they are,and remain untouched by the whole thing. Some might call this a Zionist plot.

Wet Monday part deux

Sold some 4300 May Calls at 42. Market went positive, so thinking that I have no idea where we're headed next, I have a half portion.
Looks like this is another key level, but conflicting data from the various indices.
The Dow was a terrific pivot play completely wrongfooting the system that says you go short if price opens below central pivot-well it opened below S1 smashed up through that and through the pivot- over 100 points in the first hour or so. Looks like the money trucks are being backed up to the loading bays at the stock exchanges!
My mantra is : "Do not fight the infinite wallet of bad government" It will end in tears -every government messes things up, but they can buy for a lot longer than we can stay short.
I'm still trying to make up a joke with the punchline about the bank that broke the man from Monte Carlo. The simple pleasures keep me amused.

Wet Monday

A soggy sort of day, but the market is resilient in the face of global swine flu. Looking to sell calls as is my wont, but having placed an order, I pulled it just before 1 as the market looked to be making a new high for the day. One of my metrics suggests we will have an up day so I am skittish. F has been in a 20 point range since after the first hour, and again I am inclined to see if the US futures while down pre-open, will actually smash up, as is often the trend and give me a better price for the 4300 calls.
A mentor of mine has taken a binary bet on the basis that F will not hit 4180 in this May expiry cycle- I am inclined to be a contrarian when he does this!

Mental states

Missed yesterday the combo- 4300 calls and 3600 puts- just strikes that I like-no particular advantage. The morning trade based on my thoughts that market would rise, was to sell the puts to buy the calls- this was a credit trade for 6. the market went up and it was a credit of 16 to close out the trade. Now the reverse trade,and my favourite, the risk reversal, comes into play -sell the calls to buy the puts, based on market drop. So that was a credit of 16 and close out for zero. A possible max of 38 per lot.
Missed both, annoyed and now looking a little more desperately for that trade again, but am I just looking for the 'revenge trade' as my broker used to say?
Patience required, and my gut tells me to wait until after 1.30 when most of the US news comes out. UK has some news at 09:30 which could actually keep me out of a bad trade, so I'll bide my time.
Does anyone else think it is seriously odd that this 'greatest recession since world war 2' has so far seen record profits in the shops, the banks are doing great, and everyone apart from new car salesmen seem to be doing fabulously?

Fear but no Greed

I was concerned about my short calls so closed out for a small profit, instead of doing the pukka trade-which was to add the other half to the position and buy puts, making the trade a combo or 'risk reversal' which would have been a monster trade.
It's all about mental states, and I am not too happy with my trading currently, I never seem to be able to focus on much other than options. I have had a nibble at a couple of binary bets, one loser one winner, but overall a small loss. I have enough data for developing a system and yesterday was simply a case of it didn't work-as in 40% of the time it doesn't work. Point is that the loss must be smaller than the gains, even if you have a tiny edge. This is how big traders make money- get rich sloooooow.
I love trading and have no intention of retiring-ever, though as a matter of principle I will accept any meagre pension the state may wish to confer upon me.

Tiny trader

Like several of my colleagues, sold May ftse 4300 calls as we think this rally may run out of steam, but if not the size of the position means some comfort in adjustment (like I meant to do in the last few weeks, but failed!).
My civic duties show me a side of the real economy that doesn't bear looking at- the awful poverty of the low paid, and debts pushed ever onwards until the bailiffs arrive.
I have to counter this with the knowledge that Darling is laundering our money into the banks, so they can play their games with the stockmarket, and given that they have lost more than they have ever made, they are on the biggest revenge trade this side of '87.
A wise old trader once said to me never confuse what looks like downright viciousness with stupidity-given that banks possess both those 'qualities' in spades, extra caution is warranted.
It is sickening to see the big US banks get away with murder, and I wonder if the US will see the kind of unrest that our Gallic cousins are famous for.
Not sure where Vix is headed now but a new low corresponding with the bear rally is in place. Personally I think the idea of a W bottom rather than the 'V' is more likely-I was wrong about this in 2003,2004,2005 however, and hope I have become less dogmatic-just because the markets SHOULD be on the floor, in one's estimation, means nothing.
VIX chart may mean something more than I can see in it- I think a small blip up next week maybe, but a new lower range could be defined as we head into thinner trading.

Important, please pass on the link

http://www.goldmansachs666.com/
This is to expose the ripoffs of Wall Street and how the US economy is not how it appears.
Obama is of course complicit in all the new TARP dealings,and has a 'gun to his head' same as any politician who gets in the way of the money fascists. Change no one believes in!
You may also be interested in the goings on of the Bilderberger group- named after the hotel in Holland where the group first met. These are the real power brokers, whose influence is inestimable.

What the....?

I left the house for a bike ride this morning having closed out my short calls position, and the F was up over 50 points, in fact above R1. At 11.20 someone did or said something and the wheels came off big style. Just after 2 and the market was down over 30, down to S1. Can anyone say this is not manipulation?
I am annoyed mildly because I missed an opportunity again, but should in hindsight have taken the expiry week trade when F was up 50 odd. Serves me right!
I am now thinking the only sane trade would be a very wide short strangle, as the bias again has shifted to the down side, as the US retailers confess to a drop in sales (we all know they massage the numbers horribly anyway).

Now that's unfair!

The market made a mockery of my forecast as the US starting foaming at the mouth and buying banks after Wells Fargo claimed they had made $several billion profit. Well, many of the banks have been having a ball-being recapitalized for free, and enjoying the fruits of government largesse as money is doled out hot off the printing press. (Wells Fargo may be one of the prudent banks that didn't give out ninja loans).
Doubtless there will be more rises to come, and few are now sticking their necks out proclaiming this rally to be a dead cat bounce.
So far the B of E has given away £26 billion, and more in hand, so markets can have a soft ride for a while yet.
I need to have some exposure for expiry week, and managed only to get 1/4 of my usual trade size taken as my price for a 4100 Apr call was 22, and the F flopped around the day's high for a while.
The world's economies are in danger of becoming so unbalanced as the only industry surviving is the credit industry, all around shops and factories are closing and there are a lot of angry people. The banks continue to behave badly.
It is extraordinary that as Nasim Taleb says we are rewarding the people who drove the school bus blindfold and then crashed it.
I had to revisit the long forgotten definition of the Sharpe ratio, which the banks evidently failed to comprehend as their risk was catastrophic and their rewards are actually negative. Sharpe also devised other metrics for assessing performance- all of which would seem to be looking rather sorry now. Taleb also railed against the idea of a Nobel prize for financial maths, and as seemingly everyone got it wrong in retrospect, that makes sense- though I am forever indebted to Myron Scholes and the late Fisher Black, without whom I'd be pricing options with an abacus.Or more likely phoning a friend.

Nowhere

Effectively the market had a nowhere day, just as I predicted except not.
Need to take in some premium for the Apr expiry, or the rabbits won't be getting carrots, I'll have to resort to foraging for dandelions.
Probably be a quiet day tomorrow as most traders will be taking a long break, and expiry week is usually quiet someone once told me.

Link

http://adamsoptions.blogspot.com/
Interesting and reflects my own views about what the hell is up with the VIX and call prices in general.

Cunning plan

I was hoping to sell some 4100 calls at >50 this morning, and just as I got to the screens, there was a small blip down, with F right at the pivot. I should have taken those calls at 47 and been happy about it,as the market tanked, so I could have bought them back for 20 or so- nice trade, and could have been even better as a combo, buying puts as well as shorting calls. I was not looking for that trade however, and was not entirely convinced the market was headed south.
The market seems to have moved on industrial output numbers which were better than expected although still negative. Sometimes the market wants the 'moon on a stick' and their expectations are wildly unrealistic. So the numbers were better, the market tanked. they claim to be forward looking-if that were the case they would ignore daily news, and the markets would not look like the Himalayas. Too many clever people trying to outsmart each other makes the market a dumb animal, so when it outsmarts me, I take exception.

The Trader At work

Closed out

Paid up big for my short 4000 calls a horrible 87- ouch! This now means that I am in a loss for my trading year-not by a huge amount, but March has been very unkind. My year starts 31Jan, so I have a few months yet to redeem myself and if the F throws itself off a cliff I could do well on that side too.
I can't remember a more deeply frustrating time and many traders are getting mashed by these crazy moves. there are times to stand aside and times to trade, and perhaps I should have used my brains to think about what was odd about the market- the volatility and in particular the excessive pricing of calls. I've seen puts and calls trade at the same vol, and didn't know how to trade that either- both were 9%, and using my system of comparing level premium it made no sense, until the market cracked.
Now options too cheap means a disregard for risk, options too expensive means a volatile market, but when pricing of puts against calls makes no sense again, it tells me there is risk to the upside- which in a way is more risky than downside as upside can go as far as a trillion dollars will take it.

Markets Poised

In my opinion-and you can check the charts, the plunge protection team in the US, is busy busy busy and yet again in the final hour or so they buy the market to the Moon. Obama wants the kitchen sink thrown at the market to deflect from the parlous state of the US. DOW over 8000 will they hope sucker in the mug punters and the algo traders.
I'd buy the markets if the real economy wasn't looking so dire, and not just anecdotally. I mean dire!
House prices we're told 1 minute are bouncing back,then Halifax says they are down. With 40-50 thousand repo's in the mix, it cannot possibly make sense to say house prices are rising, and compared to long term norms houses are still 20% overpriced.
Cherry picking data is what the sales people do, that's why you cannot trade on fundamentals-current markets 20%+ rise is testimony to that.
I don't mind being wrong- that just happens in trading, but I do object to the whopping great lies being trotted out.
As usual the old adage 'sell in May go away come back on St. Ledgers day' will hold good- not because the markets drop as such but trading is thinner and more volatile.
Happy trading, don't be too gloomy.

From Motley Fool(apologies)

Ugh! what the hell are they thinking? G20 will save the world? I am staggered that markets have pre-empted good news, so expect a huge disappointment when they come back down to earth.(fingers crossed)
I am short a few calls at 4000, from my idiot trade last month, and may have to spend the rest of 2009 rolling up calls!
Truly hoping this is the end of the buying frenzy that has smashed the index up 8% in 17 hours of trading, and thus yet again the myth of markets falling faster than they rise is exposed for the utter tosh it always was-the last 5 years charts show that.
What really burns my behind is that I had sold a half position of puts on monday and was a whisker away from closing out short calls -they were a buy at 37, and selling a few more 3550 puts at 50.
So far I have had several opportunities to trade out of this and each time the market has fooled me- well I can't be wrong forever, even a broken clock is right twice a day.
The above was posted today on options board on Fool, but the sentiments are what I wanted to express here, so nothing to add.
Except:
I know many traders are short calls right now, and hope they can manage. Morality is on our side!

Market Frenzy- again

I have no idea what yesterday's eruption by F is all about, but I think it lacks any sincerity in as much as the buying was absurd and in my opinion the work of an 'unseen hand'. Brown desperately wants the UK to look good with so many visitors for G20.
I was at Liffe yesterday for a 'course', but good to be in London and see a couple of friends.
One of the burning questions for me was answered- are there any equity option traders left? Answer very few- liquidity on many of the biggies is often zero, so it's all down to the index- boring though it may be.
I missed out on shorting (by buying puts) Yell and RBS(inside info on latter)But will keep an eye on my watchlist -one company I think will survive very well is MAN group.The odd long term equity play can be a good adjunct.Only using options though.