Saturday, 23 May 2009

It's Xmas time


Another Xmas tree- bought 4100/4050 put spread sold 3900 puts for credit of 9.5
Curiously and for the first time, I was able to place this trade as a limit order and it was classed as a ladder.
My logic- market highly unlikely to do much for Jun expiry(famous last words) I am taking in some premium, and market may take off to recent highs, so I keep the premium and get to morph the position. Should market drop 14%+ I will have to adjust, but I'm thinking there may be another risk reversal opportunity next week, so I will close off the shorts first with proceeds from short calls. Or I might not! 3840( break even point) is a looooong way from here.
Check the VIX for mean reversion- I think it'll drop back at the 20Ma, but it behaves so well at bolly bands.
I hope you are all aware as I have recently been made aware of....... http://www44.wolframalpha.com/input/?i=FTSE
With thanks to the good doctor.
PS I'm also watching index butterflies- while they are commission heavy, with premiums still quite good you can see a risk reward of 8/50. You don't need to run to expiry to double your money either- a 150 point move in your favour can be good enough, but if closing out, remember costs and the fact you are taking multiple haircuts on the bid/offer spreads. I tend to look at final outcomes with trades and just accept the spreads are a fact of life. Calculations are one thing and what prices should be is NOT what prices are.
Open interest is high on puts and calls, and areas that to me look like S&R based on this: 4000 and 4800. As always DYOR and debate the matter with others.

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