That Was The Week Markets Weathered the Storm
So, we are told GDP is flat. https://www.bbc.co.uk/news/articles/c203edl1zq3o But a quick look under the hood (bonnet) will paint a much worse picture. https://youtu.be/n3t-lKogLJA?si=HNswTSCZBVObfTfB
Now Sasha on YouTube may not be the establishment’s paragon of economic understanding but quite quickly he explains how the situation is dire. He shows the government numbers and reveals the real dirt. So while his integrity can be questioned, he’s qualified, smart and has no reason to lie. Of course we expect our politicians to be ‘economical with the truth’ but this is epic. And it’s not an isolated incident, the bad news just keeps coming. The US woke up about job numbers, and if you’d ever followed Non Farm payrolls you’d know how they are recorded. Just for fun look it up and look at response rates, quite how something as absurd as this is even allowed in the world’s largest economy beggars belief. Smoke, mirrors, sleight of hand. No, B.S.
Geopolitical events seem to be getting crazier, but the good old FTSE is a haven for somebody’s deep pockets. Just my own jaded view, of course. The stock market is described thus: Benjamin Graham — ‘In the short run, the market is a voting machine but in the long run, it is a weighing machine.’ So people are voting on what? I’d dearly love to know as I resolutely hold a large short position. Like Buffett and Burry. Answers by email most welcome.
In The Inbox
Couple of things this week https://masterinvestoruk.substack.com The erudition and calm presentation are most welcome. It’s Jim Mellon and his old chum Victor Hill. Sagacity and knowledge. And it’s free!
A little off piste, but aside from options we are often looking at stocks, bonds, and investment trusts. Here’s a Mello presentation https://youtu.be/-sRHE3fQkVU?si=VkH_GzkQtLtDUoOM
They seem to have a lot of companies presenting their wares, but also providing some insights. As a terrible stock picker, I have a keen interest in these, though not convinced currently with market valuations exceeding the rational.
Distraction Trades
ADA was $0.8216 now $0.9488 ( a high of $1 recently)
XRP was $2.8023 now $3.1670 Some love again for our chosen Cryptos.
DAX : 3 no entry days, 2 break evens, 1 win 150 nett
UK Gilts Were £15.84 now £15.83 This is based on the Vanguard ETF, more wobbling around. This has traded as high as £27 is it now getting interesting?
Legacy Trades -Mixed/Losses plus new trade 432
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.
Roll to September: paid to close Aug position for 300, opened same position in Sept for 370. CREDIT 70. As legacy trade it’s now a credit of 104.5, as new trade it’s a credit 223.
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 legacy 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!)
Previous position: 8450 727.5 8650 534×2 = 340.5 Losing more!
Oh dear oh dear: Now, 8450call 905, 8650calls 707.5 x2 gives us: 510 LOSS
Last week: 8450 call 772, 8650 call 575(x2) gives us: 378 Still as ugly as expected.
Was : 8450 call 774 8650 call 575.5 x2= 377 Winning! Ok it’s still horrible but our losses narrow.
Ugh! This week 8450 call 846, 8650 call 647 x2, gives us 448 we will be rolling this, remember
However, we are running this and against the current market frenzy it will get ugly, but let’s see if this can come right. We can run, AND we can hide!
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,=58 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
Was: 9200 put 39, 8950 puts 15×3 8850 puts 12×2, 8600 puts 7×2 Gives us 4, this is terrible!
Previously: 9200 put 73, 8950 puts 20.5,8850 puts 13.5, 8600 puts 7 Gives us 24.5 – well it’s in profit as we paid 20
Now 9200 put 57.5 8950 put 13.5 x3. 8850 puts 9.5 x 2, 8600 puts 5.5×2 Gives us 25 So, not a loser…
(Could have closed out as of 02 Sept: Trade 428 now 151-109= 42. but we let it run as we paid 20 and there could be up to ± 250 max profit )
Now: 9200 put 16.5, 8950 puts 3.5×3, 8850 puts 2.5 x2 8600 puts 1.5 x2 gives us a miserable 8
Trade 429 Raging Against the Machine
Maybe we get a dip, maybe the Moon is made of cheese. We find a trade that has moderate risk, generally and so we are again going with puts in a calendar ratio spread. Calendar: We sell a Sept 9150 put, 31, sell an October 9150 put, 65.We BUY an October 9250 put, 90.5. This gives us 90.5 minus 65+31= Credit 5.5
Sept 9150 put 55 Oct 9150 put 98.5. 9250 put 137.5 Ouch! That got weird. We are losing 10.5 ( late confession, the prices did NOT meet my usual criteria as we’d expect credit 20 – 30 to open typically)
Erratum: from last week: [ We BUY an October 6250 put,90.5. ] Apologies this should of course have read 9250 NOT 6250
Sept 9150 put 41 Oct 9150 put 86.5, 9250 put 123, gives us 36.5 -41= tiny profit of 1
Now Sept 9150 put 10.5, Oct 9250 put 79.5, 9150 put 53 Gives us 79.5- (10.5+53) = 16 WIN! We run it of course.
Trade 430 Risk Reversal
A risk reversal? Yes, we sell a call to buy a put on the basis of a dropping market. Having previously stated we try to be market neutral, this will offer some protection for trade 429 should we see a bigger slide. So, those prices: 9300 call 43.5, 9100 put 42 So this gives us a tiny credit 1.5. There’s quite a lot of put exposure although we try to keep trades distinct and separate. Clearly risk to the upside may come back to bite me. It is interesting to note the overall position in the manner of the esteemed Charles Cottle (gotta love his LinkedIn profile listing languages: Options Greek )
Message sent 02 Sept by yours truly: Trade 430 we could close out for very respectable profit here: 9300 call is 23 the 9100 put is 65, gives us a nice 42, plus our 1.5 credit.
Would YOU close out or do you think there’s more to come?
Now 9300 call 31, 9100 put 30 So, in the real world we’d have happily closed out. We run for fun. WIN!
We’d closed out because of this 9300 call 42.5, 9100 put 7 This was not unexpected loss of 34
Trade 431 Iron Butterfly Time?
An ‘iron’ strategy has both calls and puts so here we sell the straddle 9200 call 78.5, 9200 put 57.5, we BUY strangle 9300 call 31, 9100 put 30. We make our max profit (136-61) 75 If FTSE expires in 2 weeks at 9200. Max loss 100- 75 =25. No, this would not be my favourite position but we can mitigate losses/close out early if things get crazy. We’re here to demonstrate real trades warts and all.
9200 call 112 9200 put 16.5 9300 call 42.5, 9100 put 7. 118.5 minus 49.5= 68. Our credit 75, tiny profit.
Trade 432 October Calls -pun intended! It’s a Put Position
Big and cheap is how we roll: big rewards, low cost, moderate risk. Here’s what we have: 2 ways to look at this: 2 put ratio spreads or a put butterfly paid in part by deep (7%) OTM puts.
Here’s the numbers, and strikes: buy 9400 put 149, sell 9200 put 64.5 x2, buy 9000 put 31, sell 8650 put 13.5 x2 So we pay 20+ 4= 24 And cross fingers! It’s horrible in this absurd market, but we have no upside risk. Logic of the trade, max reward 200 possibility of loss moderate.
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.