That Was The Week Regional Banks Blew Up
So, a big market reaction for once in the right direction! We saw a substantial drop but then of course the buying came in. Expiry was 9289 and as usual there’s the monster candlestick.
We hope none of our readers got burned with short puts or even worse……. long calls. Whilst aways decrying the politics discussion it must be noted that America is lurching towards some significant events. This Saturday will see nationwide protests against the autocratic regime of Trump. Riding roughshod over the judicial system and the constitution has apparently raised more than some eyebrows. So while this Friday looked initially like a black mark because of the old dodgy loans inc. The market decided that was not the right canary in the coal mine. However the rise of the precious metals, even prompted pictures of gold bugs queueing to buy, in Australia. The headlines were perhaps a tad more dramatic than necessary. While the argument for markets being fairly valued due to inflation (they’re not) the inflation argument would make silver about 3 times the current $50 price.
Good picture, bad picture
The US and UK economies have grown, we are told, but a look at the US debt clock https://www.usdebtclock.org Raises some interesting question, but the debt/gdp ratio at 120% is far far worse than little old Blighty. We don’t consume like Americans do, and that is the engine of ‘growth’. An ageing population more so here may be a key factor. And, we are living longer. However the cost of 724 aircraft carriers is weirdly, matched by the UK debt https://debt-clock.org
Yours truly likes Auntie Beeb for a moderate approach to the business world https://www.bbc.co.uk/news/business/economy They are not trying to sell us something so I think they are neutral. Curiously my ISA providers love to send emails painting the rosiest picture of the UK, even venturing to tell me that FTSE is cheap. They cite the arcane PEG ratio from the notorious Jim Slater as a reliable metric. It’s 1.8 they claim . You want to be buying companies with a PEG of less than 1. I just don’t buy the hype, though I’m not a reliable indicator either.
In The Inbox
An invitation, and it’s free of course https://register.gotowebinar.com/register/7591972109669240409?source=12camp All sensible people with good knowledge.
Worth a look on MeetUp. https://www.meetup.com/london-options-trading/?eventOrigin=pro_network Personally I have never managed to connect with other traders but there will be be an announcement in due course, re: a London Options group, through SigNet. Watch this space
And finally don’t forget the Investor Show on Friday 24th https://www.eventbrite.co.uk/e/london-investor-show-2025-tickets-1319427756939 You don’t have to pay and you may find like minded people.
Distraction Trades
ADA was $0.6647 now $0.6363 ( a high of $1 recently)
XRP was $2.4765 now $2.3766 So, our chosen Cryptos lose a little sparkle
DAX : 4 days no trades, 1 win 80 The system did not get anywhere near entering the big moves.
UK Gilts Were £15.83 now £15.96 This is based on the Vanguard ETF, more wobbling around. A half glass of champagne this week! ‘Safe’ haven getting some love?
Legacy Trades – 3 wins plus new trade 437
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?
ROLL: SEPTEMBER TO OCTOBER Cost to close Sept:387, Credit to open 418. Nett Credit: 31
As new trade we owe 418, and took in 223, and now plus 31 =254 as legacy, we took in 104.5 +31 =135.5
We continue this and it breaks the cardinal rules of cutting losses, options can be forgiving. Margin is of course a consideration.
Last week: 849.5, 652(x2)= 454.5 so still underwater and we await a big drop or the next roll and credit.
About that BIG DROP.……..Ouch, and thrice, ouch. 1050, and 851.5 x2= 653 LOSS
Last week: 971.5, 772.5×2= 573.5 A little move in our favour ( I use the word loosely)
From credit 223, and as a legacy trade 104.5. Previous roll gave us 31.
Rolling Oct to Nov. 8450 call 8650 at expiry 904 and 704×2= 500, Nov 8450 call 930, 736.5×2 gives us 543, so a CREDIT of 43. We continue to take in a credit
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.
Now: 9400 put 186, 9200 put 74, 9000 put 29.5, 8650 put 11 Crunching those numbers: 186+ 28.5 – ( 74×2 + 11×2) = 214.5- 170= 44.5 WIN!
While this has made nearly 100% in one scenario we’d close out, but here we will run it for the big bucks. THIS is how great options can be.
Now 135.5, 44×2, 16.5, 6.5×2= 51 WIN! We are running this but we paid 24, so it may have a lot more in the tank
Seems that was the best we could do. Now 28, – 8×2, 5,- 2.5×2 = 12 We’d have been happy with the previous week’s win of 51 but who knows?
This week: 9400 49, 9200 11×2, 9000 5, 8650 2×2. 54-26= 28 We’re unlikely to beat our proposed trade close of 51.
BOOM! Expiry gave us 9400- 8289= 111 BIG WIN!
Trade 433 A Clever Trick- Don’t Try This With Stocks (You can’t)
So 429 had this outcome(we now have a long 9250/9150 put spread) : 94.5-58 =36.5 + opening credit 5.5= 42 WIN! CLOSED
What if we sell the Oct 9250 put for 94.5? What if we buy the November 9250/9150 put spread to protect our short Oct 9150 put? That costs 147.5-108.5= 39. We trouser 94.5-39= 55.5
Our position once again, we have a calendar ratio spread- 2 short puts one long put at the higher strike 9250.
Oct 9150 put 33.5 Nov 9250 put 112, 9150 put 82 negative 3.5 now this has already given us 55.5, remember
Last week Oct 9150 put is 7, Nov 9250 put 55.5 and 9150 put 40.5 gives us 8 That’s ok as our November spread has some mileage yet.
Now Oct 9150 put 8.5 and the Nov 9250/9150 put spread is: 76.5 56.5= 20, gives us 11.5 We’ll run to expiry and hope the Oct put doesn’t harm us.
9250 93 and 9150 70 gives us 23 WIN!
Trade 434 Closed out for Big WIN
Trade 435 At These Lofty Heights, Should We Get All Protective?
Put options are cheap as chips right now so let’s buy something that might give us a bit of comfort and possible reward.
A cheap and cheesy Put butterfly -October prices 9500 put 60 9400 put 28 9300 put 13. I’m sure you are familiar with the butterfly, sell the body x2, buy the wings. So our wings cost 60+13, and our body sells for 28×2= 56 So it costs us a total of 17 and could make 100. I have little faith this market could ever make a sustained drop, but it’s low cost with no additional risk, and reward is good. We will probably run this to expiry.
9500 put 104. 9400 put 49(x2), 9300 put 21.5 =27.5 – We’re in profit
CLOSE OUT, Thursday for 67.5 – (8×2) +1=52 WIN!
Had we run to expiry at 9289 it gives us 211, 111, and 11 = 0 – However We’d always take >40% max profit rather than bet on expiry. Remember Fisher Black’s words on PIN risk.
Trade 436 Who Knows What Next Week Will Bring?
So here’s the problem: The market tanked at the end of the day and looks like carrying on next week. It’s a jumble sale and Friday’s closing prices may not mean too much.
Let’s go with a very spicy 3×1 using November prices. We buy the 9400 put for 124 and sell 3x 9000put 38= 114. This is a bit spicy but we have a 400 point spread to protect us down to 8800
It still costs us 10 and spending money is annoying but the chances of the market rising and losing that 10 is minimal. It’d of course be no surprise if the market melts up, that has become the norm, after all.
Now 148.5 and 47.5 x3 = 142.5 = 6 Not sure where we go with this as the US as previously mentioned, could get really crazy
Trade 437 Calling the Top is a Mug’s game
As volatility has bumped up a bit let’s do the higher vol trade- a Strangle: We sell the 9500 call and the 9150 put for 70 each. Gives us 140 credit. Risk at 9010 and 9640
It doesn’t get much simpler than this -too simple?……..
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.