That Was The Week Temperatures Cooled, Forests Burned
Europe is fighting fires. America is fighting malevolence. FTSE had another up week. Personal bias continues to bruise my account. So, the markets are still dining out on easy money and one of my personal metrics was flashing warning signs. I use a simple metric of up days/down days*. Markets tend to have an upward bias as inflation, increase in money supply and pension contributions all add up. And yet, there are always permanent bears looking for the next dip. That’ll be me! One of the features of options is the reward profile of puts. It’s important to note this is also a risk profile. I personally remember seeing puts go from 3 to 300…. in one week. I’m sure this has happened many times, though now we live with BTFD. Yes, the inevitable tidal wave of cash that buys every dip. This gives us only the odd down day.
The trend is your friend is the old adage and the trend is upwards, but with a massive caveat. We no longer have rational administration in America or Russia. We may have irrational actors in many other nations too. The middles east has always been a threat due to divisions of territories. Other differences are also at play! There’s a word for the function of options coined by the esteemed Mr Taleb. That word is antifragile. Like insurance it’s a payoff for a surprising event. Unlike insurance it does not aim to put you back to your former position. Long puts can make you considerably richer. So can long calls. Sounds simple enough don’t it? That’s why you’re here. It’s far from simple but not overly complicated.
*A personal view that there should only be a small difference in the number of up days/down days. Currently +11
In The Inbox
From Bloomberg: Since 2007, the Treasury market has ballooned to $31 trillion from $4.5 trillion while debt as a percentage of US gross domestic product has doubled to exceed 100%. All told, years of excessive spending have propelled annual interest cost above $1 trillion. —David E. Rovella
It’s a subscription service so this is a snippet, but the implications are profound. The US government borrows money created by the Federal Reserve, as I understand it. Who pays this back? We are all beneficiaries of the money printing press. Generational gains may differ.
The London Stock Exchange will launch overnight trading next year. LSE 24 will run from 5pm to 7.50am London time, offering exchange traded products from the first half of 2027. The 300-year-old exchange’s move follows Nasdaq, which will offer 23-hour weekday trading later this year. Time in the market beats timing the market—and now there’s even more time to be in the market. Click on the highlighted text to go to LSE. The implications here are profound. We may see massive moves that we cannot preempt as we are asleep. I see no advantage other than to lure more unaccountable players to our sleepy little corner of the World. I have no insights on options here. Dinosaurs like me may see our Jurassic period ending, with a whimper.
From ONS: https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/bulletins/publicsectorfinances/june2026?ck_subscriber_id=2490452135&utm_source=convertkit&utm_medium=email&utm_campaign=Weekly%20Market%20Roundup%20-%20💰💰💰%20-%20Small%20Change%3A%20New%20Prime%20Minister%2C%20Same%20Old%20Sums%20-%2022645519 Scroll down to Figure 6 if you don’t want the War and Peace version!
Distraction Trades
ADA was $0.1660 now $0.1622
XRP was $1.0879 now $1.0902 Crypto has not been convincing lately. I like this source https://coinmarketcap.com
DAX : Under review after poor record lately 2 wins 3 no entries +200. 2 entries occurred in the wee small hours which we do not trade because we’re normal
UK Gilts Were £15.51 now £15.43 This is based on the Vanguard ETF. (VGOV) Not the worst outlook, yields in the short term may be worth a look, currently 4.78%
Silver: Using Wisdom Tree Physical Silver(PHAG) last week $50.78. Now$53.51 After the massive 10% rise it crashed back down and hence my previous entries. Do not follow me but if you have to own silver, this ETF is backed by Physical. I’m now neutral to negative, but I made a few £££ on the way. Not on board yet.
Legacy Trades, Expiry and New Trade 475
Trade 424 High Roller, This is a Trade Gone Wrong
PRECIS: We started from a July 2025 losing trade as below. Short calls are rarely a good idea.This was a ratio spread 8450/8650 calls
In summary we have an old trade from July 2025 which is a loss of 1741 against the credits taken in, of 422
So, cost 1606.5 to close, buy to open for July 1640. A credit 33.5 ( Running income 422 )
8500 2035.5, 8700 1836.5(x2) gives us –1637.5
Then:
2180, 1980.5(x2) Gives us 1781 Brutal, but we ignore the pain.
Now 8500 2006, 8700 1806.5 x2, gives us 1607 We need to roll into August expiry but the 8500 strike does not exist, so we’ll take a view in the week ( we could go with other strikes of course)
Rolling on Thursday meant going lower to 8400/8600 which gave us 17450 against the cost of closing out 16520.5 = 930, running total of income 930+422 = 1352
Still a horror show but the plan is to illustrate the ‘sunk cost fallacy’. It’s always better to close out losing trades, but we can run things to the end of days
Now 8400 2305.5 8600 2106.5×2 = 1907.5 – Uglier than the White House alterations!
Trade 475 New Expiry Cycle
A wide bodied butterfly of puts – why not? We fancy having a wide profit area in our August trade long 10600 put 165.5, short x3 10300 put 69.5, long x2 10150 put 46.5. Gives us a net cost of 50 with the trade in profit down to 10200-ish. We’re toast if the buying frenzy carries on, so can we mitigate costs? Let’s sell a 10100 put for 41. Now our cost is reduced but we have risk <10100 Our risk is limited to 9 to the upside. So we don’t mind losing 9 to be rewarded up to 300. It would be nice to say X+Y=Z where Z is the expected market range with a bias to the downside. but we have zero guidance currently. Hand on heart, this is highly speculative. You could just sell a 10100 put! (Don’t be THAT guy )
Put Butterfly 110.5, 47.5, 33. Short puts [47.5×3= 142.5] Long Puts [110.5+33×2= 176.5] Gives us 34 Our semi-naked short put 29.5 We now have credit 4.5 (we paid 9)
I’d do this again for the princely sum of 4.5
Trade 476 Keep It Simple, Stupid
Sometimes it pays to do the obvious and so here’s a strangle, selling the 11000 call and selling the 10300 put Here’s the numbers: 38 and 47.5.
The Greeks: Delta -0.03, Gamma 0.0004 but the biggie…. Theta 1.6557+ 2.2164= 3.8721 Looks sweet to me! (Ok it’s boring)
Glossary:
There are two types of options: Puts, give you the right but not the obligation to sell the underlying asset . Calls give you the right, but not the obligation to buy the underlying asset.
When you sell those options, the opposite happens, with puts you get stock ‘put‘ to you at an unfavourable price (or not) and calls you get the stock you own taken, or ‘called’ away. If you don’t own the stock you need to stump up the cash, but in both cases with the FTSE index they are cash settled at £10 a point, so losses and gains are uncomplicated.
Please read the links below for a more comprehensive explanation in simple terms. Options are about mindset, only a modicum of intelligence required.(I’m living proof)
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.