FTSE Gets A Dose of Reality? Surely Not
So, last week FTSE was up 2% , despite the ominous signs. The finance industry will tell retail ” Don’t panic, these things happen and the market will return to normality” All the while the insiders are piling out of the market.Trading floors have made epic profits and an orderly exit suits them. This is why many UK retail investors are in cash / money market funds, and share my cynicism about this cash avalanche. We get lower returns in exchange for certainty. We deal with uncertainty when trading options and get rewarded for it, mostly. So how can we or even should we trade this?
We should perhaps take stock and maybe take a step back as trading this situation is a lottery. However if you get lucky, spread the love and donate something to a noble charitable cause.
Vix had a big spike up on Friday, why would that be? Insurance is always a good idea but the market is demanding fat premiums as you’d expect. Funny thing, the market rises on greed and drops on fear, and VIX is often called the fear gauge. I believe there is no greed gauge, it goes to infinity! We need someone to invent this.
*Our title, is from Churchill’s “give me jaw jaw jaw rather than war war war”
In the Inbox
Dear old Larry, the indefatigable with another webinar about trading high volatility https://optionstrategist.substack.com/p/trading-volatility-webinar?mc_cid=1a31755053&mc_eid=5f15d5ff5d
Some market commentary from CME here: https://view.the.cmegroup.com/?vawpToken=KTYROPAUVFDE3II57HAE5R7AZ4.110055
Distraction Trades
ADA was $0.2632 now $0.2588
XRP was $1.2940 now $1.3665 nothing to get excited or concerned about
DAX : 2 Wins 2 no entries 1 break even nett: 400
UK Gilts Were £16.37 now £15.95 This is based on the Vanguard ETF. Last week’s comment: Gilts up stock market up? What’s wrong with this picture?
Silver: Using Wisdom Tree Physical Silver(PHAG) was $85.05 now $76.69 I have no idea but it should have hit $100 according to the experts (this ETC does not mirror 1-for-1 but reflects the changes )
Legacy Trades to 456, It Got Ugly
Trade 424 High Roller
PRECIS: We start from a July 2025 losing trade as below. Short calls are rarely a good idea.This is a ratio spread 8450/8650 calls
In summary we have taken in 286 (legacy 167.5) and our rolling has given us 106 We’re a very long way from home!
This week 8450c 1689.5, 8650c1491.5 x2 = 1293 It’s possible this could run for a very long time and it eats margin, but the rolling Credits may well produce 10-20% p.a.
Double Ouch! 1755.5 and 1557.5×2= 1359 Of course the FTSE’s up again so it’s to be expected. We’re only concerned with rolling to the next month until the market meets us.
Was: 1913, 1713.5x 2 gives us 1514. Given this is £10 a point that’s a hefty chunk of change so while this is an exercise in what NOT to do it’s also not a good idea.
Now: 1967,1767.5 x2= 1568 We will roll into March expiry during the week. This is, however deeply underwater.
A Glitch as futures prices created a debit where we would normally expect a small credit, thus we pay 7.5 to roll into March (Feb: 2170.5, 1970.5×2,Mar 2159,1961×2)
We now have debit of 1763 ( total income 392 )
O, me miserum! Irrumator! (look it up, it’s rude)
Now 2452.5, 2,253.5 x2= 2054.5 Remember we can run this for years! (We may have to)
1805, 1608.5 x2= 1412 recovered more than £6,000 we soldier on.
Trade 453 March Loomed large
Time for an Iron Condor? It’s time to trade March, that is certain. You may recall an Iron Condor is a short strangle and a long strangle, or in other words, selling a call spread and a put spread, which are out-of-the-money. Call spread 10600 76 10650 59.5 gives us: 16.5 Put spread 10300 130 10250 115 gives us: 15.
Personally, I think the Credit from the Put spread is hopeless and I’d go for a naked 9650Put 36.5. Which, as you know, is a Jade Lizard! Let’s give both a shot. Max loss of the IC is 50-31.5=18.5
Our Jade Lizard gets spicy at 9600. Now 9650 put is 18 our credit was 16.5+ 36.5= 53, now 31+18= 49 ( We’re on the right side of things)
Now we have 191.5, 159.5 = 31 for the Call spread and 53.5, 48 = 5.5 total 36.5 a small loss
Ugh- calls: 349.5 306.5 =43 puts 21.5,: 19.5=2 total:45 against our credit 31
(Jade Lizard calls: 43, put 8 ) Jade Lizard doing so much better in this relentless bull run
Iron Condor calls 49 and 38 puts 191 and 164 gives us 48
Jade Lizard calls 11 and the lone 9650 short put 59.5
Trade 454 The Strangle Legacy From 450’s Loss
We had a disaster and incurred a loss of 109 -let’s try and get it back from Mr Market we sell March 10850 call, 65 and 10250 put, 48 gives us 113 What could go wrong? The revenge trade is always the right choice ( you do know I’m joking, right?) So we now have 2 losing trades that we want to repair. Can we stay in the market longer than it can stay irrational?
10850 call 154.5 and 10250 put 19.5 = 174 We just cannot get a break but let’s stick with it.
Now…. 11 for the Call and the 10250 put 195.5 Is this the craziest yet?
Trade455 Puts, it has to be Puts,Let’s Go Postal
So, it seems that risk is irrelevant and this market is headed for 11000+ I am of course not making a prediction, just being flippant. However this is a ratio spread and the ratio is 3:1, we sell 3 of the lower strike and buy only 1 long 10600 44.5 10500 34 x3 Gives 57.5 credit We have some mitigation owning the 10600 put but risk is at 10466
BOOM! We are devastated.
10600 403, 10500 332 x3 = 593
( For fun we will ‘ lower our’ risk to 10100 buying 2 of the 10450 for 30, selling 4x the 10100 at 15 so this costs: Nothing)
( For fun this is also now horribly underwater 2×300 and 141×4 = credit 38 ) OR, overall we have loss of 557
THIS is a salutary lesson in making assumptions while crazy stalks the corridors of power in America. Clearly it’s underwater but we will persist.
Trade 456 We need to be bulletproof
What’s the most common trade to use with defined risk, other than simply buying an option? Butterflies. Big bang for bucks, low risk of total loss
The daily chart gives us a 200 moving average at 9640 so what if we have a 10,000, 9800, 9600 Put butterfly? Those prices 114.5, 78(x2, ) 54.5 = 13
Now that’s cheap if the carnage continues. Max reward 200- 13= 187
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, give it a whirl. (AI gets things wrong, remember)
All opinions expressed here are not to be taken too seriously and all of the trades are for educational purposes only.