That Was The Week Everything Looked Grim!
Construction, retail, only the banksters are raking in the fat profits. We’re given mixed messages about fuel bills and the budget. So, optimism in short supply markets remain aloft for now. Traders have ignored fundamentals, but as we always say the economy is not the Stockmarket. Landlords are thinking of selling up rental homes to buy stock! However that may not be a universal truth, most likely a bit of a knee jerk reaction. Good people are not landlords, we’re led to believe, but in a housing crisis they have been a real help. Older folk have often seen property as an alternative to the markets. Tenants are not, however, a guaranteed source of income.
So, politics aside it’s been a mixed week. Traders liked silver and sold off a little gold. I like silver and there are some good ETPs which are easy to trade at low cost. Testament to my trading skills, I sold after making a modest amount as silver duly rose about 8%! However, long term we are told there is a shortage and it does have a use in industrial processes. We understand gold is a store of wealth and a tradition of buying gold jewellery has historically been a firm favourite. You know what to do for Xmas!
So What’s Going On?
We are looking for clues constantly from options prices and clues are there none. Naturally it is more nuanced than simply extreme highs or lows of volatility. VIX has not hit the high of 45 from the end of March and again it made a big swoon. Active traders know to look at ‘open interest’ but the clues here are less obvious. December sees a spike in OI at the 9200 strike both calls and puts. So what else can we find? Unsurprisingly the ‘wide stranglers’ like 9000 puts and 10000 calls. You could argue that simply selling options in a low volatility environment is profitable and boring. FTSE index is being a little unconvincing and personal bias tends to claim the day. We hope to be overall neutral with the weekly trade.
In The Inbox
The patient investor gives us some more helpful insights but only see a 40% chance of a bear market
https://thepatientinvestor.com/index.php/2025/12/06/us-market-snapshot/
Dear old Larry Macmillan’s latest: https://mailchi.mp/optionstrategist/the-option-strategist-weekly-updater-4863186?e=5f15d5ff5d
Rob was an Optionetics educator back in the noughties and does his own thing here, including Elliot Wave: https://ewotrader.com/category/education/
Distraction Trades
ADA was $0.4181 now $0.4129
XRP was $2.2076 now $2.0356 So, our chosen Cryptos have been spicy lately
DAX : Terrific week 4 trades one no entry Nett: 510
UK Gilts Were £16.11 now £16.12 This is based on the Vanguard ETF. Surpassingly robust considering. It has peaked at £27 remember.
Legacy Trades plus new trade 443
Trade 424 High Roller
PRECIS: We start from a losing trade as below. Short calls are rarely a good idea.This is a ratio spread 8450/8650 calls
Last week: 8450call 1226 8650call 1027.5 x2 gives us 829 (against our credit 266 or as legacy147.5 )
Was 8450 call 1249.5 8650call 1050.5 x2 gives us: 851.5 -Expect a roll to December for credit ± 38
Rolling to December gives us 53 This was the average from 19-21 Nov. So our cumulative credit from Aug now 319 or from Oct, 147.5. We are in debit of 737 ( 1,125 minus 931×2 )
Now 8450 1297 and 8650 1098.5 x2 gives us -900 At least there’s another all due soon
8450 1236.5 8650 1037.5 x2 gives us: 838.5 Roll coming soon, or perhaps the market will get spicy.
Trade 442 We Use 440’s Win For Further Credit
So we arrived at the happy position of owning a December 9500/9400 put spread worth 29.5. (125.5- 96).
Our possibilities: Keep the spread and run it to expiry for max 100. (a)
Sell the 9500 put for 125.5 and buy a January 9500/9400 put spread( 166.5-135.5= 31) to protect the now naked 9400 put. Credit: 125.5-31= 94.5
Or…. We sell another Dec 9400 put for 96. This now gives us risk at 9300, but we have juicy credit
Now 9500 put 34 9400 put 23.5 So had we gone with (a) we’d be disappointed, but (b) Credit 94.5 gave us Jan put spread: 9500 67, 9400 52 =15, short December 9400 put 23.5
(c) Credit 96, the put ratio spread now gives us a debit 13
(a) the 9500/9400put spread is now 22.5 and 14.5 = 8
(b) short Dec 9500put 22.5, the Jan 9500/9400put spread 60 and 44 = 16 smaller debit 6.5
(c) 9500/9400 put ratio spread now a smaller debit 6.5 (credit 96 remember) Close out?……..
Trade 443. Cannot Find A Put To Sell…….
Ok so I need to set aside my personal bias and support the long side. We are buying a ladder, selling more calls than we buy.
December prices: buy 9800 call 72.5, sell 9900 call 37, sell 9950 call 25.5 . Cost therefore: 10 How safe is this? Keen eyed readers will see there’s a long spread and an extra short call giving us risk at 9950+100= 10050.
Now 9800 call 25.5 9900 call 9.5, 9950 call 5.5 We have 10.5!
Trade444
Strangle!!! Expiry on 19th December only 9.2 trading days 9900 call and 9275 put are both 9.5 = credit 19 We are making a huge assumption that this is a benign market and will not likely surprise either up or down. Prove me wrong!
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.