That Was The Week 2 Besties Have a Love In, Expiry Was Predictable
We’ll leave the politics outside and focus on our small but potent world of options. Economics, however that’s fair game and it came as no surprise to see these eye catching statements:
While not entirely contradictory it is a rather saucy piece of nonsense and the facts are exposed here: https://youtu.be/fOKeYRhumGQ?si=8_6YYGjUg5aWMAyZ
Yours truly was invited to a preliminary course on critical thinking and in doing so, I’m taking seriously the work of https://sashayanshin.com and assessing the veracity of his content. Politicians’ stock in trade is to distort the truth to suit their own position. Sasha has no reason to lie and he shows the government’s own numbers as best as I can verify. So, the point of his work is ultimately to make a living but by taking apart the flakey stats the government trots out, shows he also has a noble cause. He presents the truth as we aim to do here, with real numbers, warts and all. Economics as we often say, is not the market. However when things are going badly in one it affects the other. Timing is the key and sometimes there’s a lag, the flippant claim of ‘forward looking’ or the prosaic ‘weighing machine’.
Expiry
Expiry (9187.9) came and went as yours truly had no skin( we roll on Thursdays) in this particular game, and somehow it was not flagged up anywhere. The meaningful expiries are the quarterlies, where index futures and other instruments also expire. Price tends to converge at the ‘sensible’ level. However my own up/down count gives us year to date 93 up 62 down. To say this is out of wack is something of an understatement. Generally over the course of a year the ratios would be something like 52% up days. We seem to have 60% up but this may be an anachronism from another time. You decide.
In the Inbox
Actually from Twitter but this reflects a gradual shift and reflects the Gamestop and Robin Hood frenzy that brought options into the spotlight for retail. In the UK, sadly I doubt that even 1% of the volume is retail( you and me) but we are small fry with all Open Interest in the millions in the quarterly ICE.com reports.
Actually in the Inbox: https://www.cboe.com/optionsinstitute/
Who Should Join This Class? Investors starting their journey in the world of options looking for an opportunity to leverage expert guidance as they begin their path. Remember you will know more than a qualified financial adviser after learning just the basics.
Victor’s Value: MasterInvestor is a useful resource:
However I remain completely at odds with this raging bull market and cannot blindly accept the direction of the herd. I remain stubbornly wrong, and have yet to hear Victor’s sagacity.
Distraction Trades
ADA was $0.8098 now $0.9110
XRP was $3.3237 now$3.1117 Redressing imbalance for our chosen Cryptos yet again.
DAX : last week small losses This week: 1 loser 2 wins, 2 days no entries. Nett: 140
UK Gilts Were £15.93 now £15.82 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. It’s not going well.
Legacy Trades -Mixed/Losses plus new trade 428
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?
Was 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!
Was 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.
This week: 8450 call 618 8650 call 419.5 = 221 Worse, and maybe more misery to come, but….. we can roll, and that is what we’re doing, remember
LOSER! However we are rolling this to show how things can get uglier/ possibly better. How and when to roll? Don’t leave it to expiry, we did this on Thursday:
August: 8450 call 718 8650 call 518 rolled to Sept: 8450 call 759, 8650 call 564.5. We pay 41 for the 8450 roll, but collect 46.5×2 for the 8650, which give us: 42
As legal trade this has now given us 34.5+ 42= 76.5, as new trade 153+42 =195. (Bear this in mind as it will come right sometime!)
Latest position: 8450 727.5 8650 534×2 = 340.5 Losing more!
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.
Last week 9000 put 20.5, 8750 put 3.5(x3) Well, we’re in profit our cost was 3 and we have a credit now of 10 (300% win– we could brag, but unless we’d traded 200 contracts it’s not worth much, at £70 for a 1×3
LOSER! Ok a tiny loss of 3 but it doesn’t bode well. Closed
Trade 426, the good old Cal rat
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.
Last week: Aug 8750 put 3.5 Sept 8750 put 35.5, 8850 put 48 Winning well we run it, but to close would give us 1.5 initial credit plus 12.5= 14.
A good quick return but we want the big bucks…..and there is more to this than meets the eye
August puts expires worthless, we then have the long Sept put spread 29, 21.5= 7.5 We’d have made more closing out last week, but we’re here now. Winning, sort of
Trade 427 Gun to Head Time Again!
Here’s a bit of a quirk, it’s a slightly bonkers Big Lizard( Short straddle with a long call ) Although the strikes don’t quite add up.
We sell a 9050 call, 52 buy a 9100 call 26.5 and sell a 9025 put 26.5 . Gives us 25.5+26.5= 52 credit No upside risk, downside at 8975
So keen eyed observers will note the straddle (long or short) would be always use same strike call and put and we have 9050 call and 9025 put ( Shoot me!)
Just look at that stupid low volatility- one week to go, BIG Gamma. It’ll be fun, honestly!
Well, we didn’t LOSE! In fact this is encouraging and not such a ludicrous trade
Trade 428, A dog’s breakfast of puts
Well as there is no downside risk whatsoever, we’ll take a bucket load of puts and sell them. We’ll buy a few too.
A quirky put ladder starts with a long 9200 put, 115, short 8950 puts x3, 41=123, long 8850 put, 29×2, short 8600 put x2, 15=30. Debit 20
We have risk at 8600 but that seems as likely as the Loch Ness monster standing for Parliament (Quote me!) Max profit 250-20 =230
Here’s the risk graph: https://optioncreator.com/styasba
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.