Another go at 4500

Hope that is the top of the market for now- it is good for no one when markets rise on nothing more than 'free' money.
The damage done by banks is still filtering through to the real economy, and my heart goes out to the thousands of small businesses that will not survive. For a long time now millions of Brits have been squeaking along making minimum payments on credit cards, and all too frequently I hear how small business people have deluded themselves thinking their business is making money. This is the knock on effect of our society's distorted view. It is like the American dream, it never really seems to happen and most people scrape by thinking how it'll all turn out like a Disney film. The world needs dreamers, but dreaming is free, and needs no credit card.

Too soon?

Although I traded at the top of the market on monday we have seen a rise again today, and a fail at the key 4500 level, which I hope means the top is now in and failure to close above 4500 will bring sellers back into this bear market rally.
There is something to be said for averaging in* and I have considered this, and today was a good example of how much better my position would be looking now, but nothing to do right now, just want the F to give back 100+
* check out Oliver Velez and his position building-simply averaging in and if the pot's big enough your trade will come right eventually. Like a Martingale, but not closing out with each trade. Must be a name for that....

Hit and Miss

For better or worse have taken a combo -selling 4700calls to buy 4000 puts, on the basis that this was a big up day and this level may be the high- traded at F=4444.
This morning, and this is my lack of faith in myself, I failed to enter the opposite trade-more or less- the 3850 put/4650call which was a credit of 6 to enter and 35-40 to close. I 'missed' this, as I was not prepared, according to my new pilot's check list.
Rule 1. Market expectations- be prepared.
I needed to have in place a plan if market went up down or sideways- and NO trade is also a position. F opened down and 4300 is my idea of support and it duly obliged- I certainly didn't see such a big rise- and would have closed out very happily for a credit of 12, and joined my chums at the pub!
I do not intend to be married to these trades- they are short term- 2-5 days at most, but my first thought about this week is that Vix has dropped to what for me looks like support, and the relentless flow of total BS financial news has to take its toll soon, and the market is not pricing in anything as yet. Another bank boss gets the heave-ho and everyone starts foaming at the mouth, as if it makes a difference- and as the market gurus are so fond of pointing out, they are looking ahead 6 months( yeh right and I'm batting at 3 for England in the first ashes test). I wonder if anyone can be bothered to backtest the market moves based on this claim? I seem to recall the Chronic Investor making pronouncements which were 100% wrong in the ensuing months.
Let's have that Vix back where it belongs, where the eagles fly etc.

End of Week

My fears of a market collapse proved unfounded and I should have traded better- actually recording a small loss this week, on trade number 16 of my fiscal year. (loss<£100)
My track record is not so good currently, and this is mainly down to NOT taking trades, due to confidence taking a bit of a hit.
I think it must be so reassuring to be in a trading environment with other traders who understand what trading is. My chums and I all trade differently, and often prefer different instruments, but for me it's still FTSE options.
I was surprised to see the point and figure chart of F now showing a target of 4750, though a column of 0s has appeared.
(Stockcharts- market summary)
I shall be looking for combo's next week, and prefer to go short on a big up day- I have less clue about market direction as time goes on, and in the long term I have no interest either, though perhaps I should put in place some much longer term trades- maybe calendars.
Some more research going on as I look at binary bets and the ±100 daily bets. I have been forced to abandon my pivot method for binaries as it patently didn't work, despite my initial conviction.
June expiry is a 5 week period so be careful out there. Remember there ARE free lunches, but someone always has to pay for them.

Middle finger Salute

Well the US market and its tame puppy the F enjoyed a pleasant afternoon while laughing at the unemployment numbers- life's good at the banks, plenty of cash and zero risk, so the great 'unwashed' can go hang!
My eager anticipation of a precipitous drop came to nought, as I knew it would deep down, I'm just having a tough time convincing myself that I am right quite often on combo's and shorts. Have to step up to the plate soon, or the small army of rabbits that share our home( mostly outdoors) will have to eat the lawn, or what's left of the lawn.
Expiry tomorrow and there is a lot of open interest on both calls and puts at 4400- be fascinating to see who wins that battle, on the basis that those are short option trades, so market makers won't want to be caught with them-watch for expiry at 4402, at 10.10 tomorrow morning.
Next week- need to see some combo action, and if we get a big up day on monday should be a great opportunity-the top may well be in at 4450-4500.

What is a missed trade?

Yesterday noted in my journal (still handwritten -apparently by a 12yr old) trade to watch -June combo 4700call 4000put
Looked at it this morning and have to say didn't contemplate placing the trade as I am out wed and fri on civic duties.I also have some long puts.
The trade could have been placed for a small credit- maybe 5, but you could have closed out for at least 40.
That equates to £450 per lot, and I'll be honest here- I don't think I'd ever do just 1 lot.
I reckon there could be two of these trades every week, as I've said before- and last week missed out on a monster on Thursday.
So far this week then there was a smallish one to be had on monday as well, but being expiry week I just wasn't looking.
This reminds me of a friend suggesting many years ago that as traders we should have a clipboard(which he has) and we have a 'pilot's checklist' like a pilot does before takeoff.
Now pilots aren't idiots-but they are human and we forget stuff, so perhaps part of my joining the adult world and getting business like would make such a checklist a vital tool.
I hope this blog is enlightening some, amusing others and provoking everyone to think about what trading is.
In time I may just find out for myself.

Suddenly....... Nothing Happened

Just as I predicted except not- market has just whiffled around showing utter indiference to my position. Expiry week has no premium left in it so looking at June premium- and this is a 5 week month- do not be fooled by fab premiums- this is a 5 week expiry cycle. I'll be looking for combo's and consider the market too horrible for iron condors as they need to be ±5% of index to make any sense and recent monthly moves would seem to exceed that.

What to do?

Well it's expiry week and these have their own character which I have studied for some time- so how do I trade it?
I had expected, nay demanded an up day today to sell some calls, but it was not to be. I should just sell some puts, but we are at such a stretch on the scale of being overbought, I want to wait for a better opportunity to sell puts-this may not happen, so I am prepared to take a tiny loss on a zero cost trade- a ratio put spread for zero (cost = commissions).
bought 4200 puts and sold 4100 puts x2.
This would be great if F tanks, and I'm in profit all the way down to 4050- about 9% from current level. Problem is ........
I need a substantial drop, which probably won't happen, but my gut tells me that Dow might plummet later.
Either way I didn't fancy having naked puts hanging there in case some horrible things happen in the interim.
As I write F is only down about 30, making it look like 4400 was the low- again I was being 'clever' and expecting it to drop below just to test that level.
I do have plans for my put trade and have a variety of choices if market moves down.

Non Farm Payrolls

Cannot trade this morning as this is the big event of each month and can move the market hugely. I don't know what they grow on Non farms, before you ask! Happy weekend to my reader( or maybe it's just me)

The Dichotomy

While certain that the 'infinite wallet of bad government' is driving the market- I can't help feeling that such a crazy rise HAS to fall at some point- but fighting this looks like a bad idea. The banks now have risk free trades forever- they know they will not be allowed to fail, and then there is the real economy-global trade has dropped 44% apparently-no one told the stockmarkets.
Today watched F pass up through R1 then R2. I don't have a strategy for this- unless we count the 'Hail Mary' trade!
F is now beyond Fibonnacis and the longer term 200 day and 40 week moving averages though the 'dead cross of the 50/200 is still in place and is the last bear signal, if you count out all the overbought indicators- which seem to stay overbought/sold for so long it's not helpful.
Watching- sell 4650 call/buy 4300 for 10 or 4350 put for zero

Feeling grim

Felt like a touch of 'flu this morning so entered a trade and went back to bed!
Trade was a combo and not thinking straight but eager not to miss out after a few misses recently, I took the trade for a credit of 2 and market dropped enough for me to close out for credit of 4, so no damage done.
Trade was -sell 4450 call buy 4150 put- a combo known as risk reversal or 'synthetic short' (mentioned that before and it sounds like that awful cycling gear).
Here's the painful bit -could have entered the trade at R1,( for credit of 10 or more) even though price went through it, and closed out for about 6, so could have made 16.
We fight to live another day. (joke!)

Wither the market next?

While the buyers are having fun it seems that the relentless slow motion avalanche of economic disaster is being kept at arms length. Presuming that government largesse in baling out the banks was not entirely without rationale, and it was intended to ease the pressure on those struggling with debt, it looks like that piece of thinking might be a little wayward. While banks boost their balance sheets, rent arrears and mortgage repossessions- so blissfully ignored, are mounting and hitting record levels.
Shops are having a ball, while landlords, and lenders subsidize the spending frenzy.
The facile language of 'kickstarting the economy' may well produce a much worse outcome as the unintended consequences of the 'infinite wallet of bad government' undermines a financial system that needed replacing not patching up.
I'd like to think that I am simply pre-disposed to the doomier side of things, I'm naturally a happy person, but cannot see any evidence to suggest there are green shoots, or stabilizing of house prices. I see a huge swathe of indebted people not facing up to their responsibilities, and yet they want to maintain a lifestyle that is plain unrealistic.
People will need to learn a new word -penury.