That Was The Week
Upholders of the Constitution and the law challenged the over reach of Captain TACO. While this jolly little acronym ‘Trump Always Chickens Out’ holds true it’s probably based on more than a little ire. While Trump acolytes rejoice in their massive profits from the dump and pump Trump created, there is a lot of ill will. Yours truly just accepted I was not perfectly positioned for this as the news was already priced in. Whatever happened seemed to be co-ordinated.Allegedly. So in light of this, I cheekily lifted this:
Thanks to Barchart.com always a worthy site with some powerful Tweets on Twitter.
So, we saw FTSE dips, FTSE melt ups, and we’re still mystified that anyone thinks paying a P/E of 18.15 on an index that historically is valued at 12.5 is a good idea! Same for the US. https://worldperatio.com/area/united-kingdom/#google_vignette
Sorry to bang on about this but it pays to be aware of historical norms even if we are in the most spectacularly uncharted territory for almost 100 years. I hope we see tame market action, instead of the wild knee jerks of 2025, to date.
In The Inbox
Or rather, on Youtube https://youtu.be/X4Vx8Dy-trY?si=RY92eBL2huHTQNEs
I don’t wish to diminish the work but here’s the summation and a nod to the US market while none of this is readily available to us in the UK. We’re old school, using the CME calculator and the Ice.com live prices. No fancy bells and whistles but the maths still stacks up. Recent VIX high was about 59 and way outside the Bollinger bands. That’s pure gold for those with the patience or preparedness to sell juicy premiums. So market dips favour the patient options trader while stocks are either sit tight, or buy more, and average in. Not an easy thing to do.
Actually in the Inbox: https://www.cboe.com There is a lot of good stuff which can be applied to our sad little FTSE, though we may have lost our way relatively:
https://curvo.eu/backtest/en/compare-indexes/ftse-100-vs-sp-500?currency=eur
In fact looking at the above, it may be useful research to check back over the last few VIX spikes to find points where even FTSE options could yield massive rewards. Watch this space.
Distraction Trades
ADA was $0.7583 now $0.6670
XRP was $2.3509 now $2.1402 Bitcoin was making new highs but right now Crypto is just a world of grifters who should not be launching coins.
DAX : 5 trades 4 wins 1 break even nett: 770
UK Gilts Were £15.80 now £15.90 This is based on the Vanguard ETF, not a lot of love…
Legacy Trade 415,416 and Newbie 417
Trade415 Is The Optimism Justified?
We don’t mind being wrong, in fact many of the trade here are based on the premise of ‘not being right’. So here we take advantage of theta with a juiced up ration calendar spread. We sell the June 8650 call for 132, and we buy the July 8500 call for 294.5, and sell the 8650 for 187.5 call giving us risk at 8800. Thus we have 132+187.5= 319.5, minus 294.5 =25 Credit Logic of the trade -we can be right up to 8775 and below. We are selling 2 options and buying one, so a lot of time decay working for us. There is of course the strong possibility of FTSE going ‘postal’ again and hitting new highs. We will have opportunities along the way to close out.
Jun 8650 call 162 July 8500 call 335.5, July 8650 call 225.5 gives us a grand total of minus 52. Remember we took in a credit of 25. This trade needs time to mellow
This has yet to show a profit this week the June 8650 call 176.5 The July 8650 call 248, the 8500 call 368 gives us minus 56.5 (against our credit 25) 31.5 loss
Trade 416 We Go Cheap
We want to own some puts but don’t want to pay in case we’re totally wrong, so here we buy a put spread and sell a very much further out put to help pay for it.Thus we have long 8500 put 61.5, short 8400 put 46.5 and short the 7800 put 13.5. At expiry if the index is near 8500 we will take a view and a profit. The spread costs a measly 15 so with the credit from selling the 7800 put we pay 1.5 for this, and relax. We have risk at 7700 but in this market the frenzy of buying the dip is forever at play. (The recent low was around 7500 )
8500 put 23.5, 8400 put 16.5, the 7800 put 5 gives us a credit of 2! As we paid 1.5 we are looking at a 33% profit. Take that, stock pickers!
Trade 417 Why Not Strangle the FTSE?
I do not speak metaphorically either! Given the random nature of the markets let’s go with a strangle with equal pricing. We can get premiums of 23.5 on either side by selling the 8950 call and the 8500 put. Thus we have risk at 8453 and 8997.We aim to keep the full 47. It’s not the best time given contraction in volatility but it’s hard to make a reasonable assessment of the unreasonable.( These are for June options with 20 days to expiry)
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: surreyhantstraders@gmail.com If there is anything you’d like help with, we all started somewhere and yes, it can be baffling. There are no stupid questions
