That Was The Week Non Farm Payrolls Disappointed, Gold,Silver Up.
So, The US decided to offer a lot of support for the Japanese Yen. Normally this would not raise an eyebrow. However Japan is the greatest holder of US debt. The Yen carry trade ( borrow Yen at 1%, lend out anything else at 5% ) is great, so long as the Yen keeps its value. The US dollar as the World’s reserve currency is not indestructible. The US is not a reliable partner any more. Japan is a bit of an enigma, solid reliable economy and good governance. However their economy is an outlier with no inflation and massive debt. The greenback against Yen has risen 44% in the last 5 years. This article helps to understand https://uk.investing.com/analysis/the-yen-intervention-wont-fix-japanand-could-destabilize-treasurys-200627025 I think the World is living through and hopefully surviving the craziest period for many decades. Bessent, US treasury secretary does not have a good record, having trashed his own $5billion hedge fund.
I cannot pretend to understand such gigantic issues, but we’ve seen runs on currencies before. George Soros famously shorted the £sterling and had the UK booted out of the Exchange Rate Mechanism. Ouch, and thrice Ouch! The early nineties were lean times for the UK. We never seem to have stellar performances as an economy. However the FTSE is currently a safe haven and we plod along with rational stable governance. America’s administration is unstable irrational and at odds with the rest of the World. One man can do this, and history has warned us before.We have executed kings. America has impeached presidents. I think we arrive at such outcomes in desperation.So, that is not going to happen tomorrow. But, it’s in the ‘back pocket’.
In The Inbox
Larry has a view on the week’s trading: https://mailchi.mp/optionstrategist/the-option-strategist-weekly-updater-4865443?e=5f15d5ff5d
I have not yet seen this but I like Victor’s output, measured and sensible. https://youtu.be/2BcM-jdQRCs?si=mxtuZHM3YgYa3VWO
An email I cannot forward here had an options test, with some tough questions. Some were about strategies, some were simple(sort of) calculations. I liked this as it did make me think:
I sold 8 calls at $1.75 each. The stock was $6.50 at expiry. I made $200. What was my strike price? Bear in mind the multiple is 100. Answer at the bottom of the page. Play fair!
It made me smile and remember why we trade index options. At £10 a point it’s easy to understand the index. Yes, dividends do move the index but do not make a massive difference. However strategies are much easier to understand with an index. Also, by keeping this basket of 100 stocks, there are few shocks. In fact Space-X stock has been a massive shocker. We don’t care!
Distraction Trades
ADA was $0.1723 now $0.1996
XRP was $1.0624 now $1.0376 Crypto -it’s a mystery! I like this source https://coinmarketcap.com
DAX : Under review after poor record lately. New method but in flux currently 1 trade 4 no entries +200 nett
UK Gilts Were £15.41now £15.57 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 $52.08 now $57.77 Good for you if you climbed on board at $52. 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 478
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
Previously: 8400 2305.5 8600 2106.5×2 = 1907.5 – Uglier than the White House alterations!
Last week: 8400 2431.5 8600 2,232.5×2 = 2033.5 Yikes!
Now: 2481.5 and 2282×2= 2082.5 Nasty!
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
10600 51, 10300 20 x3, 10150 14 x2, 10100 12.5 =6.5 ( Naked10100 short put knocks it out of the park, grrr )
10600 15.5, 10300 5, 10150 3.5 = 4 10100 put 3 Frankly disappointing but very far from being in trouble. ( The short Put again sold for 41 now 3 of course you’d close out )
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)
Good grief. I can not claim any kudos for this, oh wait…. 11000 call 51, 10300 put 20 gives us 85.5-71=14.5 We’re in credit
10300 put 5 11000 call 32 =37 We could close out for >50% profit
Trade 477 Calendar Time, Some Risk, Much Hope.
AI hates this trade and it will come undone at some point. I hope we can do a decent trade repair if it goes belly up. Winning is not educational. Experience is good pain. Let’s try what we like! Using the immutable truth of greater time decay as you get nearer to expiry we sell near month and buy far month. We sell August 10500 put for 36. September, we buy 10650 put for 115.5 and sell the 10500 put for 82. Let’s do the numbers 36+82 from the puts we sell: 118. We pay for the long 10650 put 115.5. Gives us a tiny credit of 2.5 We’d be ok with the FTSE at 10350 as we have some wiggle room. Now, bask in the sunshine for the next 3 weeks, come back and collect ££££. We don’t know the future of course.
https://www.cmegroup.com/tools-information/quikstrike/options-calculator.html
Theta >2, wide range of possibility of profit.
So the August 10500 put now 10 the Sept put spread: 10650 put 72 and 10500 put 48 Looking ok as we had a credit 2.5 and it’s now worth 14 in our favour.
Trade 478 Calendar 2.0?
This is a very very safe curate’s egg of a trade. It’s calendar spreads whereby we sell a near month spread to buy a far month spread. Here’s the numbers:
Aug 10800/10700 put spread: 47-26=21, Sept put spread 10800/10700 110.5-82.5 = 28. We have a DEBIT, or cost of 28-21=7 It’d probably cost more in commissions than the trade cost! We’re going to run this to expiry and beyond!
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.
[ Answer : $6. ]