That Was The Week The Chancellor Was In Tears
Gilts wobble as rates rise but then drop, US bonds also in the picture as debt becomes increasingly more unmanageable. FED chairman Powell comes under fire from America’s lousiest ‘businessman’ and people are eager to gloss over the chaos the ‘alleged president’ causes. US debt is not a problem as strangers support the greenback, until they don’t. US housing is in a bubble and house prices in the UK are still absurd.With real economies looking more troubling will this filter through to stock markets? Or, should we believe the non farm payrolls that suggest the US economy is peachy? Forex Factory’s chart suggests this is on a glide path down https://www.forexfactory.com/calendar#detail=142571 Ironic that farm workers have left the US in their droves and this is not widely reported. https://www.reuters.com/business/immigration-raids-leave-crops-unharvested-california-farms-risk-2025-06-30/
Don’t expect unbridled optimism here! So with the rug pulled from the farming industry via ICE raids, how will the economy manage? Factor in tariffs which are due soon, though, and we’ll probably see markets hitting more all time highs. Apparently this is a more common occurrence than we know.
In the Inbox
Master Investor has a little known Youtube channel https://youtu.be/ZUFttITJpAY?si=ZGLJG1epqvKrzWJb This actually made it to my email on 02July, not sure why it was delayed but interesting content. Whilst another YouTuber actually trades options- who knew? https://youtu.be/C5we-yQWN2U?si=x30qmBE2F19WZW9x What is profoundly moving about this, is that like us he has the temerity to suggest that with options, you can fix trades, and turn losers around. You cannot do that with futures, CFDs, stocks or bonds. So, worth a look, to cure that anxiety, because trades do go wrong, and this years we’ve had a fair few. So, we try to show how to fix them. Often patience pays off and to quote Price Headley, you often make more money sitting on your hands.
And here another old legend, Larry M, giving us his views for free https://register.gotowebinar.com/register/1075113912935171424?source=9mcm&mc_cid=59b6975210&mc_eid=5f15d5ff5d
Distraction Trades
ADA was $0.5565 now $0.5726
XRP was $2.1875 now $2.2176 A little love for our chosen Crypto
DAX : 3 wins one break even (+40) one day no entry. Nett: 490 Not easy but better than the last few weeks
UK Gilts Were £16.07 now £16.01 This is based on the Vanguard ETF, not a lot of love. A few wobbles this week
Legacy Trades 420,421, 415a and newbie 422
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 &415b
Last week: A small loss 8500 call 333, 8650 call 198, 8700 call 157 gives us a shortfall 22, minus our credit 19.5
Now: 8500 call 354, 8650 call 215.5 8700 call 172 gives us 138.5-172= minus 33.5
On Jun 21, I posted this: 415b 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.
Last week: the short July 8650 call 198, the long Aug 8450/8650 call spread 381.5, 217.5 =164 still underwater but it runs.
This week: 8650 call 215.5, 8450/8650 call spread 408-240= 168 gives us minus 47.5
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!
8800 put 55.5, 8600 put 20.5(x2), 8650 put 25.5, 8450 put 12.5(x2) 14.5+ 0.5= 15 + credit 6.5 = 21.5 Not so good
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.
Now: August 240, July 215.5 =24.5 a small credit
Trade 422 A Big Beautiful Bearish Butterfly
So in these dark and trouble times we don’t want a lot of downside risk so we go with the safest trade- a butterfly. This one has massive reward/ risk if it comes off. Our strikes are July 8800 long put, 115.5, 8500 short puts(2) 45 = 90 8200 long put 22.5. Cost 48 Now we would not normally say such a hefty price but we don’t have to run this to expiry and it could do rather well. At 8500 we make 300 of course but we’ll try to catch out a few £££ and would be happy to make 40% .
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