Joey's MP Journal

[Joey25]

Playing the FTSE Single From Friday

The following data uses May Ftse levels since as an option trader these are most relevant to me. Just add or subtract the basis if trading cash, or the difference between the May and June basis if trading June FTSE.

e.g Cash: 4117
May: 4095
June: 4075

=> Add 22 if trading cash
Subtract 20 if trading June

As the FTSE trades from 8.00 am 'til 4:30, it is most amenable to the standard 30-minute Market Profile charts.

The profile shows 2 distinct Value Areas on Friday - indicating a trend day.

As discussed with the 240-minute analysis for ES, these days leave behind fadeable scalping levels.

There are 2 from Friday in May Ftse: 4070 and 4061.

Today's opening range has found a low at the 4070 single, also forming a Pin off this level. In my opinion, these are best played with limit orders and tight stops as they are initially countertrend trades.

Trade management wise, I would take off the bulk as a scalp and then use a trailing technique until close with the remainder.

 

[KillPhil08]

Been looking or a place to go long to fill the gap all morning joey . Nice to see we're seeing the same thing.

 

[leovirgo]

The following data uses May Ftse levels since as an option trader these are most relevant to me. Just add or subtract the basis if trading cash, or the difference between the May and June basis if trading June FTSE.

For this type of play, I mean intraday trades, what sort of options do you use? Best to use in the money? And what is the comparison between R:R ratios of using straightline instruments (futures, CFD, SB) vs options? Just for argument sake, say the stop here in this case is 10pts (including spreads) and expected profit is 10pts. What would the outcomes be? I am completely new to options. cheers

 

[Joey25]

For this type of play, I mean intraday trades, what sort of options do you use? Best to use in the money? And what is the comparison between R:R ratios of using straightline instruments (futures, CFD, SB) vs options? Just for argument sake, say the stop here in this case is 10pts (including spreads) and expected profit is 10pts. What would the outcomes be? I am completely new to options. cheers

Hi Leo,

What I do is position trade with options, holding for between 1 and 2 months.

I use a methodology similar to SPAN (Standard Portfolio Analysis of Risk) for risk management, and linear programming for hedging.

I'm constantly scaling in and out of futures, aiming to maximize the Sharpe Ratio of my monthly returns.

It just occurred to me recently that I may be able to apply the hedging a little more intelligently by looking at price action...

 

[MrGecko]

It just occurred to me recently that I may be able to apply the hedging a little more intelligently by looking at price action...

Where are you looking to make your money on the option trades? delta, Vol, theta etc??

And in this sentence, are you thinking about being delta hedged by default, and scaling in and out of your hedge by trading the underlying from the PA? For insance, you are short 2 ES futures for a hedge, but you see that price is likely to rally, so you take your hedge off and re-enter at a better level?

 

[Joey25]

Where are you looking to make your money on the option trades? delta, Vol, theta etc??

And in this sentence, are you thinking about being delta hedged by default, and scaling in and out of your hedge by trading the underlying from the PA? For insance, you are short 2 ES futures for a hedge, but you see that price is likely to rally, so you take your hedge off and re-enter at a better level?

I'm trying to capture theta, but attempting to optimize the tradeoff between risk minimization and hedging costs.

I'm proposing to add or subtract futures at the margin in accordance with price action.

 

[Joey25]

FTSE Setup

The Context

(i) Test-and-acceptance of Friday's Upper Distribution

(ii) 'H' Time Bracket (11:30am to 12:00) has formed an Inside Bar with a body completely above today's Open.

There isn't a stop, since this will form part of my hedging strategy.

However, if I were to plan this as a daytrade I would use:

"Stand Alone" Setup

(May FTSE levels)

Buy Stop @ 4119
Stop @ 4080
Tgt 2/3 @ 4178
1/3 "runner"

 

[Joey25]

With regard to the setup in the previous post:

Bought May Ftse @ 4119
Daily Close = 4150

P/L at close = +31 pts.

The order (breakout of the 4112 level) occurred in the 'N' period bracket, which also corresponds to the first half hour of RTH trading in ES.

 

[rathcoole_exile]

P/L at close = +31 pts.

Joey, I know it sounds like a naive newbie question, but I've never traded UK, only ever US.
what is 31 ftse points worth in real money ?

garry

 

[Joey25]

Joey, I know it sounds like a naive newbie question, but I've never traded UK, only ever US.
what is 31 ftse points worth in real money ?

garry

£310 per lot.

 

[Joey25]

May FTSE Profile (27th April)

Today's activity was very balanced until some late buying, with the Closing Range managing to develop without a pullback to the previous Intraday High.

There is a single at 4130, which is also in line with Friday's High, suggesting that this could be a good level to fade from above or below, depending on Tomorrow's Open.

 

[Joey25]

FTSE Update

Today I have attached a protective stop @ 4045 to yesterday's order.

This morning the market entered the Lower Distribution from Friday, and has so far established an Intraday Low at the Point of Control (4039 to 4044).

My thinking with this protective stop is that I get out at a level where a breakout beyond this Mean is likely, whilst still giving myself the chance of a good position should price continue to develop above the level.

 

[Joey25]

I have just been stopped out on the above postion @ 4045:

Bought @ 4119
Sold @ 4045
P/L = -74 pts.

These are booked as hedging costs against the underlying options position.

 

[rathcoole_exile]

I have just been stopped out on the above postion @ 4045:

Bought @ 4119
Sold @ 4045
P/L = -74 pts.

These are booked as hedging costs against the underlying options position.

Joey.
reality check here.
is this really what they are ?
did you pre-plan for this eventuality and the hedging write-off was part of your plan ?
Or is that just what you want to tell yourself now ?

mate, i'm not trying to be offensive or anything.
Just being the little voice of reason on your shoulder. If you're happy these are genuine hedging losses, i'm happy for you too. Just making sure you see the woods for the trees....


devil's_advocate

 

[MrGecko]

Sorry if I missed it, but what is your option position and how much did you get it for? You are using options on the ES, right?

 

[Joey25]

Joey.
reality check here.
is this really what they are ?
did you pre-plan for this eventuality and the hedging write-off was part of your plan ?
Or is that just what you want to tell yourself now ?

mate, i'm not trying to be offensive or anything.
Just being the little voice of reason on your shoulder. If you're happy these are genuine hedging losses, i'm happy for you too. Just making sure you see the woods for the trees....


devil's_advocate

Absolutely. The p/l is basically:

FTSE Option Premium - FTSE Hedging costs

I know what on average these turn out to be as a % of the option income.

The problem is, by definition, anything I close out and post in this journal is going to have negative p/l (otherwise it is providing benefit at the portfolio level).

All I'm aiming to do here is to reduce the hedging cost by making the trades conditional on a price action breakout , rather than just doing it mechanically

 

[Joey25]

Sorry if I missed it, but what is your option position and how much did you get it for? You are using options on the ES, right?

The options position is currently a portfolio of FTSE May expiry options.

Today's mark-to-market has improved significantly, even including today's loss, because I went into the day with a negative delta (from my profit point of view).

 

[MrGecko]

All I'm aiming to do here is to reduce the hedging cost by making the trades conditional on a price action breakout , rather than just doing it mechanically

I thought this is what you were getting at

 

[Joey25]

I thought this is what you were getting at

Yes, it's similar to what you said in post #286, except it's more along the lines of:

IF

(a) the hedging algorithm says "trade"

AND

(b) price breaks out

then hedge.

In other words the breakout is a necessary but not sufficient condition.

It then follows that any futures positions closed before expiry will be losers.

So basically, unless I divulge the full strategy, I'm going to be posting page after page of losers

 

[Joey25]

Today's P/L

It's difficult to explain the overall FTSE futures /options strategy in points, so being blunt:

Today's P/L (including the closed out future) was +£540

Without knowing the context of the overall options portfolio, the closing out of an individual position unfortunatley doesn't make sense.

However, if today's future had been closed out as an individual trade, it would have been stopped out at 4080, rather than 4045 (see post #287)

I've decided that at this stage I don't want to share the options strategy and hedging algorithm on a public forum, so I'm unlikely to continue with this Journal for the forseeable future.

Thanks for everyone who has contributed - it has been much appreciated.

Joey