Stocks Are Unsettled Ahead Of Option Expiry

Equities attempted a half-hearted rally ahead of tomorrow’s (Friday) options expiry. Sterling had a storming morning, but ran out of puff this afternoon.

I’ve been wary of trading the FTSE index (^FTSE) today. Sure, equities do look vulnerable, but there’s just a chance of a squeeze into tomorrow’s expiry. Yesterday the US indexes made new lows but have since bounced from these levels. I might miss a golden opportunity to get short again, but there’s plenty of other fish to fry.

The great thing about spread betting is that if I don’t fancy one market there’re bags more to choose from. And today I chose an old favourite, GBP/USD. This one looked a non-starter first thing this morning; the price was above its pivot point but too close to the top of its recent trading range to risk a trade. However, the force was with Sterling and a steady up-channel was soon testing the $1.43 big figure.

I waited for the price to gain a foothold above $1.43 before buying a £3 bet at $1.4325. The trade worked a treat and I sold £1 at $1.4388, trailing my stop at a safe distance. After an early sniff at $1.44, profit-taking saw the price retreat, stopping me out at $1.4365 for an overall profit of £143.

The morning’s price range was pretty close to the average so, although I was tempted back in, I decided to leave it till the US session. Afternoon trade got off to a slow start. I favoured another long bet but didn’t fancy getting sucked in until Sterling had established itself above $1.44. The price pulled back after making a new high at $1.4418, allowing me to buy a fiver at $1.4404.

My timing was spot on (lucky) and the price was up at $1.4430 before I’d written my trade down. I sold out £2 at $1.4436 and brought my stop up to break even. Most of the excitement was in that initial move and I edged my stop loss higher as the price struggled to make headway. My balance was stopped out at $1.4424, on the way back down to the big figure, for a healthy £124 profit.

Perhaps not a massive haul on the day, but the two trades were planned, went to plan, and put some notes in my back pocket.

Update:
Equities were unsettled after a weak Philadelphia Fed number, but I’m still leaving them alone for today.
Sterling reversed a big chunk of its gains, dropping to $1.4290.
The Euro has gained against both the Dollar and Sterling.
Gold’s been jumping around like a cat on hot coals, swinging between $970-980.

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