254W/e 18Feb Puts not Putin

A Curious Week as FTSE reverses gains, and we have some more great outcomes

Much to mull over this week but in discussions with a fellow trader I was hoping to use live intra-day prices on Friday. Storm Eunice had other ideas as the power went off late morning until 5.30pm. Oh come on- smartphone? I was watching the battery power dwindle while trying to get FTSE, and never mind the 15 minute delayed ICE.com prices. Meanwhile,we saw more downside with cryptos and of course every share that I own. Oh wait! My silver ETF almost hit break even! I am thankful I do not have to pick shares for a living.

The options world, as I am wont to point out, is the tail that wags the dog. We learn that SOFR options hit a new volume record


What is SOFR? Remember LIBOR? Like that but not a total joke.


Options on the overnight repo rate are doing great business – an $80 trillion market puts things into perspective. I mention this as it got my attention in the myriad emails I get, for free, every week. The options stuff gets my attention. The stock hypers not so much. This a great site to smash the myths on individual stocks, and the drivel trotted out. https://www.stockgumshoe.com

And forex? Cryptos? Those guys have evaporated, with their magic systems and ‘this is going to the Moon’. The harsh reality for this trader is that options give you a real well proven, time tested chance. Thus, for me, everything else is a wet finger in the air.

My Own Trading- Up Close and Personal

So, if confession is good for the soul I may have multiple souls. I believe Week 249 I said ‘ Did we stick to the knitting?’ Well did we punk? NO! A resounding NO. This idiot ended up shorting 7450 calls on 22 December for no good reason. It was a stupid kneejerk trade. I found myself looking at a 5 possibly 6 figure loss. How did I deal with it? I rolled those calls from Jan 7450, to Feb 7550. FTSE expired below my strike meaning the options were abandoned- I didn’t even need to pay commissions to my hard pressed broker.

So, is there a lesson here, apart from: don’t be an idiot? I will always be an idiot but I will maybe try not to trade like an idiot.

Options saved me from a humbling and large loss. Often being ITM (in the money) is nothing like as troubling as it may seem.

War notwithstanding, let’s hope the market continues to make its random walk, and give us options traders an annual 20%+ profit

Distraction Trades

DAX one 300+ trade plus 2 losers (30 at each) and 2 no entries.

ADA Cardano -ugh!

XRPUSD – ugh!

Have we been scammed as late adopters of crypto? These remain a distraction from our bread and butter trading.

Legacy Trades, 254 Smashed it, 255, for March

251 Legacy Butterfly -Tough to Exit

So, we traded with the market’s money and used the  Feb 7300 put that we own. Simple choice- the market may take a tumble on Monday based on the futures close, so we could wait, but lets do a put ratio spread at 7500(long) 7400 shortx2 

Thus we have the following prices: 137 and 100.5×2. We are now the proud owners of a butterfly. We are bulletproof. Our credit on this trade is 64. We could have sold the 7300 put for 74.(We still bank 64 and buy a pizza!) However this way we could make another 100 

Made 14 on Monday but one can take a chance and sell the upper wing 7500 put at 62.5  I have actually been advised by a broker to do precisely this although not maybe with 4 days to go, on Thursday it was 20, so……WIN a bit of a trawl though.

252 a game of forks- we used March expiry

Hopefully you can see puts and calls at the 7150 strike for March expiry, whereby we sell the call and 3xputs at the same strike roughly below the index minus the straddle- but with some wiggle room. We like have roughly level premium either side 382 for the call and 122×3 (366) for the puts. 

We can use the premium to do something interesting too -we take in a whopping 748.

Now?  644– but on Tuesday it was 652. Either way- we’d take a profit of ± 100. In %age terms this is not huge compared to margin required but it is a peach of a trade again. WIN!

496.5 and 46×3=  534.5 WIN MORE!   OK- exit or what? 

It was 621 to close on Friday so we were right to bale.

253 Vol has shrunk- what’s to do?

Oh dear- what a quote!

It may be that given the mild moves we’ve seen, that vol is shrinking and the market going nowhere- just an opinion, but what’s to do? It’s a double ratio, buying the straddle and then we ratio the wings of a short iron butterfly. Say WHAAAT??

We bought the 7500 straddle and sell the wingsx2( 7600 calls and 7350 puts ) February prices 

Note those prices – we pay 91.5 for the 7500 call and take in 44×2= 88 for selling 2x 7600 calls = 3.5

And the puts -we pay 98 for the 7500 and take in 50.5×2 for selling  the 7350 puts = Credit 3

We have risk at 7200 and 7700 but probably going to make more than the cost of 0.5

175, and 21.5 (196.5) for the straddle: the strangle:  95.5×2   and 9×2. = 209 Small loss last week

Expiry at 7547(probably)

We could have closed out for 49 on thursday or waited and  watched expiry and get 47. WIN

254 Normally We’d Look for A Calendar Spread

Front month prices are stupid low on the put side, otherwise we’d look at a put ratio calendar spread

OK- this is nuts but let’s have a play – we BUY 5 Feb 7500 puts  5x 21.5  and sell 1 March 7500 put  110.5  (110.5-107.5)= 3 This trade is known as a backspread and whilst they can bite us bigly, they can be rewarding short term. Price Headley(check him out) is a proponent of this trade, when it makes sense. But did it?

This was posted on Valentine’s day- so if you were otherwise occupied -tough!


This morning: Trade 254- long 5x Feb 7500 puts short 1x Mar 7500 put did this:
5 x84, 1×195. While the Mar Put doubled our Feb puts quadrupled.
Profit 225, minus the cost, 3. Gives us 222. That’s £2,222 for one round turn of this puppy.


Out of the park? We OWN the park!


255 After 4 big wins, what’s to do? GUTS that’s what!

Remember I mentioned being ITM is not as scary as you think? Well I DID say that! Time and again I have been in that position due to rubbish trading. And yet, here we are every month coming up with the goods. As I also said I was hoping to place this trade  intra day with dynamic prices but the power grid denied me.

This trade is called a GUTS -sounds like stepping up to face the Jabberwocky, ballsy and fearless, but is it?

A GUTS is an in the money strangle- so you will always be closing for the minimum debit. Here we are 100 points ITM either side, so this trade can never be cheaper than 200 to close (in theory, I’ve yet to test that). We sell the following March options:

7400 call 197    7600 put 220.5= 417.5 credit 


I hope it’s clear from the Greeks we are not so far from being delta gamma vega neutral  and theta is roaring along at 5.5. Vol is a shadow of its former self but we have to trade what’s there. Think about how comfortable you’d be if a) You bought these or b) you did the reverse strikes and traded it as a strangle 135+ 82.5 =217.5

Spot anything regarding those combined premiums? Max profit……

Where’s our risk with a GUTS? Is it a better trade than the strangle? Let’s find out.