That Was The Week Expiry Behaved a Little Better. The World looked More Risky
Politics never looked so crazy, but ask yourself this: When was the last time you thought ‘ there’s a leader I admire’ ? Or, ‘that’s a government I can trust’. So let’s move swiftly on. We saw inflation rise above expectations, but we know how out of touch these numbers are, even when massaged. We get the repeat messages about water companies, local councils, potholes, town centres in crisis. Is there nothing to be hopeful about? AI and quantum computing and the pace of tech continue to deliver surprises in a good way. Sport as ever still entertains us, while cheap terrestrial telly gives way to the streaming services, in sport and drama. We are spoiled for choice if you have deepish pockets. However, we still have libraries for those of us who still like the printed word.
Expiry, Nothing much to Say
We were told 8685 https://finance.yahoo.com/chart/UKXSP.L
So again a salutary lesson if you want to run positions to expiry, make sure you’re well out of the money. Next up the March expiry is one of the ‘Quarterlies’ where equity options and futures expire, and thus volumes are much greater. Remember the future is as it says on the tin, pricing in future events like dividends which is why they only perfectly coincide with the cash near to expiry.
This caused some amusement: https://www.investmentnews.com/industry-news/dealers-under-pressure-as-traders-pile-into-vix-calls/259386
Couched in some luvvie language, basically if dealers have sold calls, they need to hedge them and one obvious way is to buy the underlying. VIX has bumped up into the weekend and FTSE futures were off 36, actually lower by 50 points against the cash. Interesting that the Russell 2000 was down nearly 3% I am reminded of the many traders who told me they never hold trades over the weekend.
In The Inbox
First up the annual bash in Islington https://events.masterinvestor.co.uk/master-investor-show/about-the-show/?mc_cid=843ce78382&mc_eid=d8dfffc5d3
Some years ago yours truly spent some 20 minutes chatting one to one with a certain Mr Farage who inexplicably had a stand for UKIP which had not drawn much attention. I did not feel blessed by the encounter.
It may be last minute or inconvenient but I believe by registering you can claim a recording of the Tasty Trade event: https://tastybeginner.livebashhttps://tastybeginner.livebash.com/?mi_u=58909002926&mi_ecmp=185893079094&utm_campaign=tl_event_2025&utm_medium=internal_email&_hsenc=p2ANqtz-9fCWepCbAO8AJ9ZnswH4qbgqTyt4LQmQ7NBpFyrtb3sEbQx4DqnRQYwmEgaewTk9AKj57qq3zwPxW0okQcE9UZ208fhzYHCVo8I1X-oZgGr1OhPkY&_hsmi=346560840&utm_content=live_bash_two&utm_source=100com/?mi_u=58909002926&mi_ecmp=185893079094&utm_campaign=tl_event_2025&utm_medium=internal_email&_hsenc=p2ANqtz-9fCWepCbAO8AJ9ZnswH4qbgqTyt4LQmQ7NBpFyrtb3sEbQx4DqnRQYwmEgaewTk9AKj57qq3zwPxW0okQcE9UZ208fhzYHCVo8I1X-oZgGr1OhPkY&_hsmi=346560840&utm_content=live_bash_two&utm_source=100
Stock lovers?Also Jake Bernstein, author, trader and the excellent options trader Larry McMillan Several days of sagacity: https://www.metastock.com/offer/event/?whc=traders-conference&pc=EQ-Conference
Distraction Trades
ADA was $0.7881 now $0.7706
XRP was $2.7903 now $2.5878
DAX : N/A Site Down APOLOGIES
UK Gilts were £16.15 now £16.05 This is based on the Vanguard ETF (not a recommendation)
Legacy Trades 396-403
Trade 396 Calendar/Time Spreads
Our weapons of choice:
Jan 8200 call 83.5 Feb 8100 219, 8200 150 call spread. So we sell the Jan 8200 call and buy the Feb 8100 call and sell the 8200 call (83.5 minus 219-150)= 14.5 Thus we have a small credit 14.5 but that’s not the point. This is a trade with some flexibility and of course we have done these many times, it’s a combination of theta and a fair chunk of protection. We have zero downside risk, which is not a bad thing. Let’s hope calm heads prevail as the chances of economic growth are <zero, or slightly>zero.
Now the 8200 call for Jan 84.5, Feb 8100 235, 8200 call 164 gives us a debit 13.5 Caveat: This was placed before the crazies bought the market.
So the Jan expiry at 8495 made the call worth 295 against us. The feb call spread 442.5- 350= 92.5 A horrible loss. (Ok we took in tiny 14.5 credit)
So here’s the risky plan.
We buy back the 8200 call 350 and sell 2 8300 calls 262.5 gives us 525-350=175, mitigating our loss to 120, but with risk at 8500. This is risky as the market can get crazier than seems humanly possible.
Risky plan update, the 8200 call 328, the 8300 calls 239.5= 479, gives us 151 -could be worse and best case 8300 might not happen but 8400 would do nicely
However the FTSE is rising, fact is that somebody has the hots for it.
This is woeful MASSIVE LOSS 293 8200 call is 487, 8300 calls 390 (x2) Remember we could have swallowed the 78 loss
Was 8200 call 495 and 8300 call 397 x2 gives us 299 Ouch!
Now: 518.5 and 419×2 gives us another slap in the face: 319.5 LOSS
Expiry at 8685 gives us 485, and 385×2= 285 LOSS
Dare we roll? We are here to educate by doing so here we go: Rolling to March 8200/ 8300 would give us 273.5, so we have a rather ugly cost of 11.5
Trade397 Closed Loss
Trade 398 Closed: Win
Trade399 Closed: a Challenging new Trade Idea, Gearing Up
So, with a firm conviction that the worst trade is a long straddle, we look to test that hypothesis. We take a standard iron butterfly which sells the straddle and buys the outer ITM options. BUT! We sell 2 straddles instead of 1.
To clarify, we BUY the outer ITM Call 160, and Put 174.5. We SELL 2 each of the 8500 calls and puts. 95×2, 86,×2, gives us 334.5- 362, gives us a credit 27.5
Now, I’m going to be cheeky here and suggest you plot this yourselves, bearing in mind the buy/sell and quantities involved. You will see the profit zone giving a maximum 300 + our Credit. Is there a downside? We’ll address that in due course. So here’s the graphical calculator https://optioncreator.com/new
CAVEAT: This is not recommended and may get in a right pickle! You’re all aware that this is purely for educational purposes, and prices were at close on Friday: https://www.ice.com/report/265
Apologies, I sent an erroneous link to the options creator, but this has been a disaster. We have 206.5 and 26 for the straddle 8500 call and put. We have 295.5 and 64 for the wings. So here’s the maths: We sold 2 straddles which now cost 232.5×2= 465. Our long strangle is worth 359.5 a loss of 105.5.
That could have gone better.
Last time:the straddle is 293(x2) our LONG strangle 423 gives us a loss of 586-423= 163 ( OK we took in a lofty 27.5)
223.5 and 7 for the 8500straddle x2. Gives us 461. Our LONG strangle: 320.5 +24= 344.5 loss 89 Not recommended previously stated but we run it
At expiry a loss of 85 and looking at keeping it simple as an iron butterfly using one option with each strike it still lost 53.5 LOSER
Trade 400
I’m stumped. Honestly this is completely new and, frankly, terrifying. Let’s tempt fate with a short 8800 call at 30.5 and a put ratio spread buying the 8600 for 47 and 8500 for 26(x2) gives us 5, +30.5 =35.5 Credit We have risk at 8835 and 8364.5
Was: 24.5 and 34.5 minus 18.5 x2= Debit 27, our Credit was 35.5 A tiny glimmer of hope as our losing streak continues to dominate
Now 13.5 and 15, 7×2 =14.5 We soldier on but it’s doing ok (credit 35.5 remember)
WIN as everything went out for Zero. We collect our credit 35.5
Trade 401
Let’s go with the esteemed Professor’s straddle
Feb expiry: 
As you see the February prices at the top are miserably low, so we’d go with the March expiry but here’s the Greeks so we can watch the gamma /theta relationship. You can see they are both elevated for the Feb expiry.
This week: It’s done ok 
So the prices for Feb straddle –we sold for 132, now 95. March straddle we sold for 239, now 219.5 However as an exercise check out the gamma and theta on these puppies! Both trades are ok, but Feb trade is clearly the winner.
Caveat: Really not recommended!. And yet: WIN The Feb put made 15, the call went out for zero, initial credit 132 ( Rather fortunate for the Feb straddle)
March: 8700 call 71, 8700 put 124.5 Our initial credit was 239 thus we have 239-(71+124.5), gives us 44.5 WIN
We will run this to March expiry for fun, but a surprise win for Feb expiry
Trade 402 We Use March Prices
An old chestnut and a safe trade with fair chance of doing ok. It’s the iron condor. We sell both side of the market but with short spreads. So the prices nearer the money are the options we sold. And here we choose 50 point spreads. Calls: short 8850, 47, long 8900, 34.5. Puts: short 8550, 59, long 8500 47.5. So as a credit trade we take in 12.5 for the calls and 11.5 for the puts. We take in 24 and our risk is 50-the 24 credit It is a dull trade with limited potential as it ideally needs to see both sides at expiry got to zero, avoiding costly commissions.
However there is an ex-Harvard man, Jared somebody, who made his first $million in his early 20s with these. He may still be in the same business, but these went pear shaped for a while as risk/reward no longer stacked up.
Calls: 8850 25, 8900 17 = 8, Puts 8550 62 8500 49= 13. Rather uninspiring.
Trade 403 How to be Bulletproof For Next to Nothing(March Expiry)
Futures point to a very likely drop on Monday but we have Friday’s prices as always. So, swings and roundabouts, we place the trade which is a ladder/condor/Xmas tree. It’s a combination of 2 ratio spreads as follows: Long 8600 put 78.5, short x2 8450 put 39.5, long 8300 put 22, short x2 8000 put 9.5. Here’s the arithmetic: 78.5+ 22, minus (39.5+9.5 x2)= 2.5.
So for a cost of 2.5 we get nice downside exposure at 8600 and risk is very far away at 8000. These kind of trades have a very wide profit range no upside risk but possibly only a moderate chance of profit.
For those new to options:
https://optionsinvesting.co.uk/special-edition-how-options-work-1/
https://optionsinvesting.co.uk/special-edition-how-options-work-2/
https://optionsinvesting.co.uk/how-options-work-page-3/
Contact: [email protected] If there is anything you’d like help with, we all started somewhere and yes, it can be baffling.
