Quick update

Sold some FTSE july 4500 calls yesterday at 16.5 I am expecting the F to drop, but evidently someone else has other ideas.
I have been pondering which sort of businesses are recession-proof and I think insurance is probably a steady earner, though you can't prevent the banks making massive profits, as we well know!
Heat, Wimbledon, and hayfever have seriously addled my brain so very light touch this week, unless the market decides to provide.

Conspiracy

I do like a conspiracy theory and I just stumbled across an article pointing the finger at Goldmine Sachs, the architects of the credit crunch(allegedly) who are now making out like bandits and getting record bonuses on top of the record profits at everyone else's expense. Let's hope Americans have a pair where we in the UK do not. Let's see some real action against the Wall st banksters- after all if terrorists inflicted that much damage on the world we'd be spending billions bombing sand dunes.
Which brings me to the point of the article- everyone remembers being baffled as to why Gordon Brown sold off over half of the UKs' gold at rock bottom prices- well apparently Goldmines had a short position amounting to 1,000 tons, and they were about to be blown up. Broon being the banksters' pet poodle dutifully obliged, sending the gold price lower. True or false- it was a very odd decision, even in light of Labour's loony spending.
Well, not quick enough on Fri for a risk reversal- missed it by a whisker as I put the order in- sell 4550 calls buy 3900 puts, I only wanted a credit of 2, but FTSE was thinly up about 50 or so at 4300 -which is the new resistance. Last week I noted 4400 was it. Coincidentally it was pivot level R1 on the daily chart.
Wonder how much longer the markets are going to stay aloft- more importantly how will I trade whichever way it goes.
Lastly as I keep talking about legging in I was reminded of an ancient TV comedy- early Goodies perhaps, about the life of a great Russian composer, his name?






Yaputya Lefleggin. It still make me smile!

Late To the Party

Didn't see a potential risk reversal as the F made a 70 point drop, but recovered when the US went bonkers because the recession is clearly over- GDP only a negative 5.5%. Actually no idea why the US got the hots, but is is prone to doing that-the BS machine is far more efficient over there.
I have been for some time wrestling with the actualities of trading iron condors- ie selling put spread and a call spread, both out of the money.
I'll admit to being supremely biased as I thought adjustment might be unworkable. As time marches on ( and I miss getting my price for said iron condor), and I monitor a joke trade made in anger for a financial website, I start to see a great many ways to adjust- the key thing with options traders is to get that premium tucked away first, and while IC (iron condor) might almost negate my Xmas tree, I am prepared to admit that while everyone is calling the market down, it really does not want to go just yet.
So to be neutral on direction- which the market has gifted to those astute traders for 2 months now looks like the smart move. It's easy to call these things after the event, and as VIX shrinks to (unacceptably low levels) I'll have to review this situation.
Proposed trade- sell put spread-4100/4050 and sell the call spread 4450/4500. I wanted at least 20.5 but didn't get it. A bolder trader might have legged in with a put spread first.
Trade has only 21 days to go-actually it's more like 14 trading days take out w/ends and expiry at 10:a.m. Risk = 50 minus premium taken in(20.5) = 29.5. Based on 10 lots that would be risk of £2,950 to make £2,050 plus costs. Assuming trade is 100% successful it represents a return of 68%. Compared to short strangle it might make more sense, but of course one takes a haircut on every aspect of the spreads, which is of no relevance as it is good to know the market maker can still buy a capalatte -triple mochachoca-double -decaff on his way to the factory!

Legging in

Legging into a christmas tree-bought the 4050/4000 july put spread and sold a smattering of 3900 puts, hoping to leg into more of these later if market does do the decent thing. The obvious supports if there is a sizable drop- 4000 and 3800- which would be ok for me. Any more than 3800 would be a challenge.
My position currently gives a negative theta(time decay in my favour) of-1.9 and delta +0.1, pretty much gamma neutral too.
Having fun with Samoasky which of course disagrees with me on most of my calculations, but the differences are tiny. the optimum return for this position as it stands,would give 26.46% profit apparently.

RBS gets new bankster

Apparently 9 mill gets you a top notch high flying bankster- I sincerely hope he's not of the same calibre as the lamentable bunch of imbeciles who were running things under Sir Fred- most of them lost their own shirt because they are too stupid to know how to hedge their own stock-allegedly.
The business model for a bank is the same as a charity shop-your stock is not only donated for free, it is delivered free of charge to your premises. Even the worst run charity shops make a profit, so banksters might want to go away and have a big think about things. I hope RBS will recover- they have our money after all, and it'd be nice to get it back-with extortionate interest and default charges of course.
I hear Natwest will open a new account for anyone with a detectable pulse!
No obvious trades today as I think the US might fall further once europe closes, so tuesday is possibly going to throw up a trade or two- possibly a combo selling very far otm puts to buy some calls.

The Stunned Mullet

I read about one of the posters on a well known UK financial website who used the above epithet to describe some investors he knew. This was in reaction to an article by a staff member who had explained why he was selling his Barclays shares.
All too often with people who buy shares, they cannot help but watch the prices and then get stressed out when the shares tank- which they always do. Sometimes they bounce back and that then causes further stress for these mullets- do they now sell and recoup their losses or hold on in case it goes higher?
No rules means no win.
Winners have rules.
A loser is a forced buyer or seller- a good trader will have losses but will not be a forced buyer or seller- they will have closed out before the market forces their hand.
I have a rule of thumb for selling naked options- if premium trebles it's time to adjust. It has thus far served me well, though I will confess to premium trebling+5%, and the market then reversing in my favour. It's not 100% rigid but it's not an exact science.
So why oh why do major institutions try to make trading an exact science with their armies of quants and super computers?
I don't see them making the big bucks-that seems to be done by the 'barrow boy' traders

Expiry Shenanigans

While I decided this week not to be an idle screenwatcher if there is nothing to be done, this morning's expiry was a bit of fun.
My liabilities went out worthless. I was short 4200 puts, and with the F almost 100 above they looked pretty safe so we won't mention how I accidentally paid a fiver each on IB. Doh! What I should have been focused on was the 4300 call- which in the space of 30 minutes went from 6 to 30. I am sure there are expiry experts, and I have met a real life specialist in this arena, but I do like the wild punts based on the predictability of a rising market from the preceding thursday lunchtime, or the Fri morning swings.
I can imagine a few niche traders around the world who trade these few hours once a month, spending the rest of their time sailing or on the golf course. It's a low risk strategy with such rich risk reward.
Meanwhile I was delighted to see Pakistan beat South Africa- I'm convinced that SA are in league with the devil, they just seem to make impossible catches, and have batsmen who never get themselves out.

Funny old day on the F

40 point range -all quiet after yesterday's thought provoking drop. There are times as Price Headley says when you earn more by sitting on your hands and doing nothing. I could have possibly traded in and out of my short 4200 puts, but comms would have swallowed a chunk of that as moves were not so big.
I see no reason for the market to get excited one way or another- so while I think shares are priced at twice what they are worth, the market thinks they are just right. I just trade the wiggly line on the screen and the statistical 'edge'. I'd like the F up about 200 though, I'd like to sell some calls.

Expiry week trade

Sold to open 4200 jun puts- these of course expire at 10.10 Fri morning, so hope the drop is not the pending plummet that I expected last month. Much talk of Jun 30th being a crunch point as fund managers look to do something or other.
CNBC reported a trade - someone buying 45/55 VIX options call spread for July expiry based on a possible big drop(in equity markets obviously). I have little faith in CNBC's investigative powers, and they claim that this is 20,000 lots, you'd question how they were able to place such a monster trade, and why would you place it all at once?. VIX has blipped up, and I'll be looking to place a July put Xmas tree, and maybe I'll leg into the naked shorts.
I will hope to sell some calls this week- the June series, but the market may not be kind enough to offer meaningful premiums.
Meanwhile the 20-20 cricket has surprised me as an entertainment- a slogfest, but quite enjoyable.

Wither Vix?

That's some downtrend, what next?
Collapse of options volatility has scuppered my expiry trade entry for friday, but market action was lacklustre, as it seems the clueless are running out of steam. Volume is declining, so like a good options trader I expect and actually enjoy a dropping market, mostly.
The disconnect with the real economy and ACTUAL data like real house prices, do not reflect any 'green shoots'.
The next crisis will likely be gov bonds being shunned, and an increasing mortgage rate giving rise to more foreclosures.
Employment is not picking up and the governments efforts to provide jobs, and to help people in mortgage difficulties have proved less than worthless.
The government will have to make massive cutbacks to the bloated army of civil servants, the tax take will be down, so quite how the economy can be moving out of recession looks a bit suspect to me.
Printing money works well until it doesn't, like the last debt bubble. I get the idea that there is a natural level of 'value' by that I mean consumption and overall quality of life, which is on a gentle slope upwards, but gets beyond itself and corrects-there may well be someone who plots such metrics and has a perfect model for trading the stockmarket. That person is not me!
Terminator Salvation is fun but while the plot lacks a degree of sense, the action is great-big nasty machines against soft squidgey people- quite what the machines want is not clear, but I'm steering clear of any appliances that show a modicum of ambition!

Phew!

Managed to get a trade finally. Wed morning the F smashed up to pivot level R2 and just below it around 4470 I placed a combo-'risk reversal' selling 4600 calls and buying 4250 puts for credit of 4. Closed out for credit 6 this morning. Had I been around to leg in half and half I could have got a better entry for as much as 15, so averaging into the trade at >10. I was not around.
Prices per lot.10= £100.
As long as I can capture one or two of these each week until expiry week( and might have the chance to do a combo even then) I am confident I can remain profitable.
I have now moved into the black for my trading year to date, as March was such a horrible month as the banks took our money refused to lend it out and got busy buying the stockmarket and commodities.
I don't care if this rally is phoney or not, but every instinct, and my own empirical evidence suggests we are only halfway up the Swannee. I trade intra- day, and intra-week, overall direction has some value, and while I rant about the real economy, the game we play in the markets is another world, a wiggly line on a chart.
Expiry next week, so I was keen to clear the decks today and even indulge myself with a trip to the cinema to watch the latest Terminator movie, which may be as lame as Angels and Demons, though it would be hard to beat that piece of garbage, in my opinion.

Up and Down combo's

Possible trades- yesterday with the F down over 50 it was possible to trade a combo selling the 4150 jun put and buying the 4550 jun call, for a profit of around 20 per lot. Today market was up enough to close out of that and get into the downside trade, selling 4550 call and buying 4250 put for a profit of >20 per lot. Did I trade them? No, I saw both trades too late and then got fearful about entering late into today's downside combo which even if I had got into for zero would at one point have given me a profit of 10 per lot.
Let's see how many trades I can miss in total this week.
I believe I have often said there are at least 2 combo trades per week- you just don't expect consecutive and instantaneous ones.
Note to self: Is the high now in for the summer?

Make me a Fool why not!

I have recently been testing out the reality of volatility over its calculated value, and the FTSE according to Wolfram had a daily vol of 2.4% which meant that you'd expect 100 point moves on a daily basis. On thursday I was discussing this with friends and the apparent paucity of such events- well this week we've had 3 days of >100 point moves. Last week 2 days, and so on.
What this tells me is that I have a perception that is frequently wrong, and this was based on the performance of binary bets, to wit the ftse to stay in range ±100 on IG Index. I have tried to trade this as a sell for 90-95, when ftse is at parity at lunchtime, on the basis that it will move when the US opens- not by 100 but by enough to justify a small stake of 5-10, with the hope of getting 20.These have been dismal lately, and Fri morning I placed my first real money bet on the F staying within range- buying at 56. I closed out for a small profit, as I didn't want to be in the trade for non farm payrolls, and I was right to be out of it, as the F smashed up with the usual fervour of a 6 week old puppy only to drop back 50 points.
The moves happen they are tradeable, and I need to be a bit more 'on the ball'.
I'm not sure about any more upside on ftse, and stochastic may be signalling some doubts.

Just a Quickie

Bought to close my short 4650 calls -sold for 33.5 bought back at 25.
Reason for this? Wasn't comfortable with the trade, and I think the market will go higher because everyone's telling it to.
Latest bit of the jigsaw is the Coppock indicator which may well prove a self fulfilling prophecy.
I'm nervous about shorts after the FT proclaimed there was almost twice as much cash sitting in funds as there would normally be at the bottom of a bear market.
Everyone says the US will lead the world out of recession, and so far very little of the TARP money has been used, we are told.
Looks like the markets are stronger than the real economy suggests.
I fully expected today to be an up day and with 90 minutes remaining that may be the case.
Yesterday may have been skewed by the European public holidays also.
Note: FTSE has been above the 200 Ma on weekly and daily charts for a while, the US has yet to catch up- that will probably happen.

Half Portion

Sold 4650 calls for 33.5 this morning, caution advised as the Americans seem to be 'on something' again. This is after all the stockmarket that has been given a risk free multi billion $ injection. It reminds me of a space escalator, where the markets are leaving terra firma further and further behind, on a journey to the outer atmosphere. You look down and there's nothing below!
The US markets are still below their 200 Mas and if volumes are light today, it might be a good time to add to my short calls and buy some puts.
I note for the first time in several months the volume of puts now exceeds that of calls, and prices are starting to normalize- the volatility relationship is nearly back to 'sensible' to reflect that downside risk insurance should be more expensive than upside.
It's a wake up to me as I have never seen such a skew in call prices as we had recently, and should have taken that as the cue to go long.
Boat? Missed the? As per usual I fail to get on the big trends, it's not really how I trade, but also shows how hard it is to know which way the wind blows.
Option 'prices' should never be a barrier to a trade- if you have the conviction on a direction, just trade a spread*. In the very short term, intra day I reckon buying naked is ok, but I would only do that if I'd sold something else to pay for it!
* this is why I think covered warrants are such a ripoff, you cannot sell to open, and they are about 25% more expensive than exchange traded options.