stevespray
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Morning People….
I thought that it might be interesting to try and post a series of ‘live’ trades online to show folk how it is possible to make money from spreadbetting. I’ll try and demonstrate as best I can a series of trades, which I do most months, that produces a nice little income flow from spreadbetting. I must stress that this isn’t and invitation for others to follow but purely a practical demonstration of a generally successful strategy. As always people should conduct their own research as to whether a particular methodology of trading is suitable for them.
We will start the trade by opening a series of options position. These are as follows…..
I have sold the following…..
FTSE October Options
4375 Put @ 16.4 for £20
4400 Put @ 19.6 for £20
4625 Call @ 28.0 for £20
4650 Call @ 20.0 for £20
Total points sold = 89.4
Dax October Options
4000 Call @ 24.7 for £34
4050 Call @ 13.4 for £34
3700 Put @ 26.6 for £34
3650 Put @ 19.1 for £34
Total points sold = 83.8
Dow October Options
10550 Call @ 31.3 for £28
9750 Put @ 27.5 for £28
Total points sold = 58.8
S&P 500 Cash Options for October
1145 Call @ 4.8 for £56
1070 Puts @ 5.6 for £56
Total points sold = 10.4
Those are the initial positions that we will take. These are known as ‘option strangles’. Basically what we will do is just watch. The only time we may need to act further is when the market approaches or passes outside one of our ranges on any of the strangles. Personally I like to place a number of ‘crash stops’ in the market just below the base of each strangle. This is just in case something horrid occurs while I am away from the screens. You can in fact place just one stop in say the ES’s or the YM’s but make sure that the number of contracts is large enough to roughly hedge the entire number of Puts that you will have exposed if something did happen.
Even though the basis of these trades will be to make money using spreadbetting, I personally use a direct access platform to place any hedges which maybe required if one of the traded markets looks like it might be too strong or too weak. This fact needs to be kept in mind. It is possible to use spreadbetting to hedge as required, but if you need to jump in and out several times to effect the hedge, you may find the spreads prohibitive – direct access is excellent for this.
I use a psychology for these trades. I just say to myself that the spreadbet companies are paying me to take these positions. The number of points and the stakes they are paying me are shown. Should the need arise I will have this cash available to defend my position in the market. This will obviously be done buy purchasing a number of futures in the underlying to offset our Put or Call exposure.
Obviously, in an ideal world, all the Puts and Calls will expire worthless and we’ll pocket the lot. The stakes are priced as they are so that we can hedge directly into the underlying using the relevant future which is in a currency different to GBP.
Feel free to fire in any questions,
Steve.
I thought that it might be interesting to try and post a series of ‘live’ trades online to show folk how it is possible to make money from spreadbetting. I’ll try and demonstrate as best I can a series of trades, which I do most months, that produces a nice little income flow from spreadbetting. I must stress that this isn’t and invitation for others to follow but purely a practical demonstration of a generally successful strategy. As always people should conduct their own research as to whether a particular methodology of trading is suitable for them.
We will start the trade by opening a series of options position. These are as follows…..
I have sold the following…..
FTSE October Options
4375 Put @ 16.4 for £20
4400 Put @ 19.6 for £20
4625 Call @ 28.0 for £20
4650 Call @ 20.0 for £20
Total points sold = 89.4
Dax October Options
4000 Call @ 24.7 for £34
4050 Call @ 13.4 for £34
3700 Put @ 26.6 for £34
3650 Put @ 19.1 for £34
Total points sold = 83.8
Dow October Options
10550 Call @ 31.3 for £28
9750 Put @ 27.5 for £28
Total points sold = 58.8
S&P 500 Cash Options for October
1145 Call @ 4.8 for £56
1070 Puts @ 5.6 for £56
Total points sold = 10.4
Those are the initial positions that we will take. These are known as ‘option strangles’. Basically what we will do is just watch. The only time we may need to act further is when the market approaches or passes outside one of our ranges on any of the strangles. Personally I like to place a number of ‘crash stops’ in the market just below the base of each strangle. This is just in case something horrid occurs while I am away from the screens. You can in fact place just one stop in say the ES’s or the YM’s but make sure that the number of contracts is large enough to roughly hedge the entire number of Puts that you will have exposed if something did happen.
Even though the basis of these trades will be to make money using spreadbetting, I personally use a direct access platform to place any hedges which maybe required if one of the traded markets looks like it might be too strong or too weak. This fact needs to be kept in mind. It is possible to use spreadbetting to hedge as required, but if you need to jump in and out several times to effect the hedge, you may find the spreads prohibitive – direct access is excellent for this.
I use a psychology for these trades. I just say to myself that the spreadbet companies are paying me to take these positions. The number of points and the stakes they are paying me are shown. Should the need arise I will have this cash available to defend my position in the market. This will obviously be done buy purchasing a number of futures in the underlying to offset our Put or Call exposure.
Obviously, in an ideal world, all the Puts and Calls will expire worthless and we’ll pocket the lot. The stakes are priced as they are so that we can hedge directly into the underlying using the relevant future which is in a currency different to GBP.
Feel free to fire in any questions,
Steve.
