That Was The Week A Touch of Reality Crept In
So, the world’s conflicts, craziness, financial shenanigans, economic reality caused a bit of a wobble. Our concern is that VIX was doing squat until Friday, perhaps a slight murmur in light of the non farm payrolls. As we now know, the job numbers were terrible and previous rises have been revised down dramatically. The glorious leader lashed out as if reality was not the problem. The instability and ludicrous pantomime of the US administration has taken its toll before, but the market bounced back. Biden’s economy’s doing ok, it’s Trump’s inheritance to destroy. I’d suggest there’s previous form here! We were told there would be pain.
In fact it was, in addition, Tariffs 2.0 and the reactions have been fairly muted, but of course it’s a free market. We consumers are free to shun US goods and services. The IMF says UK growth is predicted to be 1.2% this year, and 1.4% in 2026. I wonder if, adjusted for inflation, this is beyond terrible. We hear business confidence is hitting lows not seen since 2009. Keir Starmer reckons otherwise. I appreciate as doom monger in chief, the economy is not the stock market. Traders may be buying like there’s no tomorrow on Monday.
I wonder if anyone noticed the EU Trump ‘deal’. Russian oil oligarchs have been lining their pockets selling oil to the EU but our European cousins will now switch to the US. I understand this was a deal already in place under Biden but volumes will increase to cover the Rusky shortfall. Indian oil barons may have to pay a price for their continued cheap Russian oil. I daresay Russian oil will probably be even cheaper anyway.
In The Inbox
We have 6 hours of trading education for free: https://youtu.be/eDWAxFaxWkM?si=1UR4dCGSuIjgmFWL At 2:56:56 we have our old friend Larry Macmillan dispensing pearls of wisdom about options and the market in general. He has long been a stalwart of the options community. He also presents in a very agreeable style with no over-complication. Those among us who like a bit of complication, this week’s buzzword has been’ Convexity’ https://en.wikipedia.org/wiki/Convexity_(finance) Knock yourselves out with ‘Jensen Inequality’ and’ Girsanov’s theorem’ . I imagine some among our readers know these concepts intimately. Please let us know if you do. We know options traders are a spectrum from those who are pure speculators who take a view and buy/sell accordingly.(With no Black Scholes calculations). Traders at the other end will surely be the quant types, and there’s room for everyone, unless A.I wipes us all out.
Also in the inbox- https://prosperitypub.com There’s a sign up too for: 0DTE options webinar , and some folk I know have dipped toes in the water. https://joinnow.live/a/ApJhen?af=RTS_NT_WRM_EDT_RTW_RTW325_WRM_20250304_0202&utm_campaign=493715999609&utm_content=RTS_NT_WRM_EDT_RTW_RTW325_WRM_20250304_0202&utm_medium=email&utm_source=492419933979&utm_term=NON
Always in the Inbox: https://www.youtube.com/@omni7575
Keith gives us early morning insights- it’s a couple of minutes and another perspective.
Distraction Trades
ADA was $0.8185 now $0.7168
XRP was $3.1897 $2.9559 Another small drop for our chosen Cryptos yet again.
DAX : 3 days no entries, 3 wins, one loser nett: 400 The strategy missed some huge down moves, but while missing possible gains, it still captured enough.
UK Gilts Were £15.85 now £16.00 This is based on the Vanguard ETF, not a lot of love, though of course price goes down, yield goes up. Hard to know if Gilts are worth having. But interest rates may have to drop once inflation is out of the system and job losses mount. Gilts should then rise.
Legacy Trade 424 (was 415b)
Trade 424 High Risk Big Reward
We will roll Trade 415/415b but also instigate a new trade which is long August 8450call short 2 x 8650 call. Those prices: 531 and 342, so as a new trade there’s a CREDIT of 684-531= 153. As a legacy trade there is a small credit 34.5. This as you can see, is deep in the money with risk at 8850 This may be a struggle but what if we can roll, for a credit ad infinitum?
Now 8450 call 652 8650 calls 456.5 x2 Gives us: 913-653= minus 260 We are running this, remember but it’s not pretty right now!
August 8450 call 600 8650 call 405.5 =minus 211. Still underwater with both trades but remember we are rolling, as and when it’s optimal.
Trade 425 Can We Keep Seeing High Prices?
So my Spidey sense are not working. But we need to have something that might reward us in the unlikely event the market might be allowed to drop! Let’s give a spicy 3×1 another chance. We use August options, and sell 3 puts for every 1 that we buy. Here the 9000 put is 48, the 8750 put is 15. Gives us 48- 15(x3) = debit 3. Risk, then at 8640 ish.
We own a .30 delta and have sold 3x.10 deltas. Gamma? 14, and 6(x3) Volatility is appalling!
This week: 9000 put 61, 8750 put 19.5×3 gives us 2.5 Interesting now volatility has picked up. In fact Volatility picked up at the close on Thursday puts by almost 10% increase in premiums:
Prices on the left are the closing prices for Thursday, Wednesday’s close is the next but one column.Calls on the left, strikes in the centre ALWAYS. Example: 8800 put went from 44 to 48 but call prices gained too.
Trade 426
Another rinse and repeat, here we go again with the calendar ratio. We sell 2 puts and buy one. We sell Aug 8750 put 19.5, and Sept 8750 put, 60 and we buy the Sept 8850 put, 78. So the maths geeks will notice we pay 18 for the long Sept spread, and receive 19.5 for the short August put. We are getting 1.5 for our troubles. Ordinarily I would not wish to have put risk as the week following some disturbing events may require restraint- sitting on the sidelines. However we pledge to show a new trade each week. We do, of course, have a fair chunk of wiggle room here. Somehow 8650 is a key level to my mind.
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
All opinions expressed here are not to be taken too seriously and all of the trades are for educational purposes only.