That Was The Week Crazy Became Normal
So, an uneasy ceasefire exists amid so much uncertainty. So,the markets took this as a sign-business as usual, buy, buy, buy. However the buy the dip, buy the tops has persisted as it has been the right thing to do, in this other worldly era. However, our own little FTSE creaked up on Friday, as up days now outnumber down days by 30. Regulars here know we expect the worst on a daily basis, so take it with a pinch of salt. So, look at the charts, fundamentals, macro economics and find what chimes with you. No need to state that, as every trader finds their way, or quits. In fact knowing how to make sense of the underlying is the only skill, the rest is maths.
On the world stage, the USD hit a 4 year low against the jolly old Pound. A dollar is worth only 73p. My admiration for those who have managed to make money from the situation. However as we only trade in sterling the effect is negligible. Yes there is flight of capital from the US, but also from the UK, and physical gold is alleged to be undergoing repatriation to the owners, from the US. Thus fear of what the now unassailable president may do, has created a lot of anxiety. Yes, some nations’ physical gold could be confiscated, it seems, on a whim. I’d like to believe the UK would not behave in such a way and other people’s gold remains theirs, even as it resides under the streets of London.
In The Inbox
Trading 212 warned of pump and dump scams, as they attract £ billions to their smart platform. Facebook scams are rife too, but I’m probably preaching to the choir, here.
CBOE This week invited us to a webinar about crypto. We don’t engage, but their educational webinars are available on replay. Have a rummage on the site, there’s something for everyone. By everyone, I mean options nerds.
Omnipredictor -good sensible early morning stuff for us UK traders from Keith Coterill, who like yours truly has a bit of a ‘thing’ for silver. Signing up for his daily email link is free.
https://youtu.be/Ol5RO9z4_TA?si=3L8PWUnOJijKmyDD
Distraction Trades
ADA was $0.5821now $0.5565
XRP was $2.1392 now $2.1875 All a bit uninteresting. Precious metals are in the spotlight again. Having been handed their rear ends within a few days
DAX : 3 days no entries, 1 loser, 1 win Nett:110 The weirdest week yet as the pre-market open action tends to be early upside moves
UK Gilts Were £16.06 now £16.07 This is based on the Vanguard ETF, not a lot of love. It’s hard to know whose government’s debt is the worst, and the £ is strong against the USD.
Legacy Trades 420,415a and newbie 421
415 How It Went Wrong And What To Do: It Becomes 415a
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
At expiry, the 8650 call went out for 180.We took in a credit 25. So a loss of 155. However:
We’re proud owners of the 8500/8650 call spread(worth 126 ) and we can get our 155 back. We sell the July 8700 call for 174.5, giving us 19.5 credit. So now we have risk at 8850 and no downside concerns, so here we have:
Trade 415a
This week: A small loss 8500 call 333, 8650 call 198, 8700 call 157 gives us a shortfall 22, minus our credit 19.5
OnJun21, I posted this: The other possibility for repair of Trade 215 is as follows:
We have a loss of 155 and a July long 8500/8650 call spread. We SELL the 8500 call for 338.5 and buy the August 8450/8650 call spread for 157.
We now have credit 181.5 so our loss is now a small credit 24.5 and a good looking call ratio calendar spread with risk at 8850.
This week: the short July 8650 call 198, the long Aug 8450/8650 call spread 381.5, 217.5 =164 still underwater but it runs.
Trade 420
June punished us for poor trade selection, but sometimes the strangle is the ‘go to’ trade. So, what can we do for July? We have 27 days to expiry. Here’s a double put ratio spread.
8800 put 110 8600 puts 55 8650 puts 64.5, 8450 puts 35.5. We buy 1 8800 put and sell 2 8600s. We also buy the 8650 put and sell 2 of the 8450 puts credit 6.5
This makes a profit down to 8300 and to the upside has zero risk. Anything lower than 8800 and above 8300 is our target, and we can adjust along the way.
8800 put 69, 8600 put 24, 8650 put 30.5 8450 put 13.5 gives us 69-(24×2)= 21, 30.5-(13.5×2)= 3.5, a total of 24.5 credit. We took in a credit 6.5, winning!
Trade 421 taking a simple principle
So, something has been troubling me and this is the overpricing of calls. While the term’ overpricing’ can be subjective it’s also sometimes fleeting. This came about from these guys talking about deep in the money covered calls. https://youtu.be/oxNvLwZ0dGo?si=vU24WddYTQ3IMmiz We are pure options traders, however and don’t own futures or stock. So, in this market that may take a dip we sell an ITM (in-the-money) calendar spread.
A quick glance at theta- all good, Deltas -ok, Gamma- near enough, volatility, in our favour. Our cost is 19.5 and at expiry we’d expect the August call, minus the July call value, to be worth more than the 19.5 we paid. There is a lot of leeway more than a simple buy and hope. We may be able to morph this too. And YES, there is risk but it’s not likely to be a game changer.
NB Underlying= FTSE future at the cash close at 16.35 on Friday.
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