Historic Octobers

A RedBraced expert recently told us that "October . . is historically a weak month for equities." Worth checking, I thought. So I checked. The results are shown above. . My basis of calculation is - % change in the FTSE 100 between market close on the last trading day of September to market close on the last day of October in each year shown. We see that in this "historically weak month", the FTSE 100 Index has risen 19 times in 25, and has fallen in the other 6. The average change over all the Octobers since the FTSE 100 index was originated (January 1984) is only +0.29%. The maximum October gain was in 2002, when the FTSE 100 rose 8.55%. The biggest October fall was in 1987, when the FTSE 100 fell 26.1%. Now - this doesn't prove that RedBraces Angus talks through his hat, because we haven't compared this result with FTSE 100 performances in Januaries, Februaries . . . etc. And this analysis doesn't compare the FTSE 100 October performances with other indices, for example, the FTSE 250 Index or the FT All Share Index. Nor do we know what Angus would consider a "strong" performance. So in his own terms, he may well be right. But in my view the important thing to remember is . . . in randomly changing systems such as the FTSE 100 Index, the past is no guide to what will happen next, and your guess of where the Index will be at end October 2009 is just as good as the RedBraced oracles' . . . . or mine! Remember - if a consensus of experts COULD predict market movements reliably and accurately . . . there wouldn't be a market.

And While We're On The Subject . . .

. . . of Global Warming, Climate Change, Saving the Planet and all that . . . I'll swap my incandescent bulbs for those depressing yellow-green (or 6500degK brilliant white) low energy monstrosities when H.M Government TURNS OFF THE FLOODLIGHTING on the Palace of Westminster and instructs local councils to do the same on its Town and City Halls. Until that happy day, it's another case of "do as we say, not as we do." FTSE 100 Share Index closed last night at 5159 and Apple have borrowed my trusty old G4 Powerbook OSX v4.1 Tiger to bung in a new CD drive.

Public Spending Cuts . . .

. . . we are told - by all 3 political parties - will be necessary. This is because H.M Government has given so much of our money to our busted banks and to Sir Fred Goodwin. (because he needs more yachts, Lear jets and holiday homes.) Well and good! We are all enthusiastic socialists, and so must be prepared to tighten our belts so that the reckless rich can be made even richer. But how do we - or rather you, dear FellowBloggers - reconcile Public Spending Cuts with the appointment of Martha Lane Fox to the post of "Digital Inclusion Champion" (BBC Business News, 29th.September 2009, interview with Robert Peston.) I intend no criticism of Ms.Lane Fox. Far from it. She could probably combine the roles of First Lord of the Treasury and Chancellor of the Exchequer better than the present ambiguous and dithery incumbents of those high offices. (But it would be nice to know her "job description" and how much impoverished Public Spending is paying her to execute it.) If Ofcom can't tell BT and the ISPs to get their fingers out and lay down twentyfirst century broadband infrastructure, what can Martha do? The same interview brought tidings that the French Government has declared that internet connection is a "human right" equivalent to electricity and water. Gordie Brown was twittering along these lines not so long ago. Well, if that's what EU leading lights think, let them try the following experiment. Do without broadband for a fortnight. Then try doing without water for a fortnight. Then try thinking for a fortnight before you open your mouths.

More RedBracesSpeak . . .

. . . from the "Guardian", Saturday 26th. September. Here's a typical pronouncement from One Who Clearly Knows, to whit, Angus Campbell, Head of Sales at Capital Spreads. (Spread Betting.)

"It was a poor week for the markets, and the lack of any revival or concerted effort to recoup the losses so far doesn't bode well as we approach October which is historically a weak month for equities." Decode that. Check it against the facts. Like . . October 1987 was "weak" and so was October 2008. But what about all the Octobers in between . . . and now Angus has pronounced, do we better know where to strike our October FTSE Index contracts? If he means "last week", the FTSE fell 90 points. 90 points in a whole week! A fall of a gigantic, never-to-be-recovered whole 1.73%! Oh My Gawd! Give us a show, Angus - jump from a high window to celebrate the End of the Financial World. The Business Press and News is loaded with Anguses, whose guesses are no better than yours or mine. Opened short 6 x 5500 October Calls and 6 x 4500 Puts, expiring on 16th. October, receipts for these opening sales - £1018.40. FTSE just now at 5100.8

Yeah . . right . . . whatever

Today's 'Daily Mail' tells me that ". . . Alistair Darling is to haul in bank chiefs and demand that they do not pay lavish bonuses ahead of legislation to crack down on 'recklessness and greed' in the City . . . " Methinks he's lost that one before he starts . . . . Non-U.K nationals may care to know that Alistair Darling is Chancellor of the Exchequer, and there are no strings on him . . . except the ones pulled by the Lads Who Put the 'W' into Banking . . . the IMF . . . the World Bank . . . the PSBR . . . the European Parliament . . . the European Commissioners . . . and probably Mrs.Trellis of North Wales . . .

September FTSE 100 Index Contracts

Opened (short) with 6 x 4300 Puts and 6 x 5200 Calls on 21st. August. Raised the Puts strike to 4675 on 8th. September, and closed out the Calls on 10th. September as the FTSE rally through the 5000 level continued. Net profit on the September FTSE contracts - £881.00.

Centrica plc Contracts

My main concern during the September series (expiry 17th. September) was with my covered Call options on 5000 Centrica plc struck at 260.0p. I opened these Calls when the stock stood at 246.5p in March 2009. During the contracts I received the half year dividend (£436.50), paid in June. Towards the end of the contract the stock rose from a low of 217p to 268p a few days before the contract expired. I was in some danger, therefore, of being assigned. I would have had to sell the shares for 260p. Well . . . counting the div and the opening receipt for the Call options, that would have made a nice profit. But with the next ex-div date coming up on 23rd. September, I closed out the 260 September Calls and sold 5 x March 2010 280 Calls. The net receipt for this transaction was £187.00. Counting in option receipts, and including all expenses, the shares have cost me net 226.36p. Centrica stock at the moment is 257.4p mid. I have qualified for the next dividend payment, but it would be unwise to sell the shares. Fans and Followers will by now be able to say why!

August FTSE Contracts

Twenty (repeat 20!) trades in the August series FTSE Index options, opening (short) with 6 x 4750 Calls and 6 x 3800 Puts, yielding £988.40. One of the dangers in this game is - after a longish series of successes (see top of this blog) Little Option Traders start getting too clever by half. They imagine they can second guess the way the FTSE is going to move. And they are right - exactly half the time, which is what you'd expect from something as random and as disconnected from economic reality as the FTSE Index is most of the time. Sufficient to say that after chasing the bluddi Index here there and everywhere, and, let me add, QUITE UNNECESSARILY, I ended up in profit on the FTSE trades to the tune of a magnificent £109. So, Fans . . . don't play around with perfectly safe positions - despite my antics during the month, the FTSE ended the August contracts (on 21st August) slightly above my opening 4750 Calls and a single buy-back on the penultimate Thursday was all that was needed . . . . Hmmmm. Lesson to be learned. This game ain't investing, it's BETTING. And as long as your bet ain't broke . . . don't fix it!

I'VE BEEN IN THE BACKWOODS . . .

. . . but now I'm back. I will post what happened in August and September tomorrow. Oh, yes! Some of you might be wondering . . what happened to his Centrica covered Call options, expiring on September 18th? Well . . . I sidestepped the assignment. Will post "What Doctor FTSE did next" tomorrow.