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.

Faint Heart Ne'er won Fair Maiden

As my grandmother used to say- so this week some fainthearted non- trading, as I failed to see the 2 or more combo trades this week, and yesterday didn't get a fill selling 4650 jun calls. I was out at civic duties from 11.a.m and am not entirely comfortable trading when away from the screen, although only once have I changed my mind intra day. However my levels would have been hit, as I also put in a cheeky order to close out some of my short 3900 puts. I re-placed the order when I had the opportunity on Fri afternoon but the high was in and the F was fading ( I was looking at R2 - around 4460 as the high).
Point is- I realized this week how sensitive I am to outside interference, and I am more fickle about taking trades than ever I was as a pro musician. I have had more tantrums as a non- musician but the one I did have cost us a major record deal.
OK I don't have tantrums with trading, but I kind of 'sulk' when I miss trades, get annoyed when I am losing, and feel a little 'lighter' with winning trades- but frankly it's not about winning it's about probable profits, so it's no big 'hurrah ring the bell' kind of thing for me. I reward myself with time away from the screen.
Not sure what I do about being so fickle- living with a woman tends to give one empathic moodswings, and while I love every day of my life with my chosen one, there are times..............

Lame day

Well after yesterday's frenzy as a survey revealed 8% didn't think the world was going to end in 2010( I love the bias in these things) a pretty dull day, though I almost got excited about selling calls.
Now according to the FT these surveys have a big influence on markets- what George Soros calls reflexivity- Hungarian for 'a bunch of idiots sharing the same delusion'
Can't deny the influence and how often does one see optimism produce amazing outcomes?
A little off track- our vet today gave us a reduced rate on rabbit vaccinations, because she's a lovely human being, and a great vet. Would it hurt the banks to show a little kindness after the huge amount of charity we've shown them?
Barclays should be ashamed at charging 21% interest, when they get the money for 'free'.
If, and this is a biiiiiiig 'if' the government were sincere about giving the economy a boost, they would give the money to the people ( a 2 year break from council tax I say). They are simply, and beyond argument, the pathetic poodles of the banks and do whatever they are told- nothing has changed in 100 years. The Great War enriched the financiers while the great and the good suffered and died.
Can I be a capitalist with a sense of fair play?

Fun day

How bizarre- the F tanks, then finds support at 4300, shoots up and ends up about 50 as the US reacted to a 'survey' of consumer confidence. So 20 'domestic engineers' on Prozac move the world's markets.
Of course the markets trade 6 months ahead, and this is just a coincidence.
I may have missed the long trade for this week, so wait until it looks like a short term top.
June is a bad month statistically, Murphy's Law or rather the Fed's trillions might prove otherwise.

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.

Size is important-size and position

Background- felt ill this morning -flu like again, so not ideal for making trading decisions. However I was happy to see the F down 70 points to S1*, so decided to close out my combo-short 4700 call long 4000 put, for a credit of 6.
The trade was placed for a credit of 4, but went against me as F smashed up about 80 above my entry level, which didn't bother me, but should have made me think about averaging in. I saw key level of 4450, but possibly 4500-turns out the 4500 was attained, so I could have really juiced up my combo by putting on more of the same trade.(possible credit of 20)
What to do? Curse my luck, blame the rabbits? Of course! And then when the mist clears, get analytical, and see how I could have done better.
I will re-evaluate my entry size, and accept that position is often not the optimum, and this can be mitigated (al la Oliver Velez) by legging in. Legging out can be good too- eliminating all risk, and leaving room to capture more of the move- e.g. closing out short calls and selling puts further out creating say a 4000/3850 put spread. I may be wrong but I just don't see the F down at those levels-Brown and his B of E chums won't let that happen. I am out of the market now, and will reward myself with a trip to the cinema with 'er indoors' blessing. Angels and Demons will be a gentle distraction.
*Pivot levels seem to work much better on DOW- for help with these- mypivots.com is terrific, and free.