That Was The Week
US inflation at 3.4%, impending impeachment, Trump’s on a golf jolly in Ireland. So, clearly the World is in good order, no need to worry. Our own economy grew 0.4% in June-July apparently due to A.I. One can only presume there are areas of our lives that A.I. has improved, but robot football, robot Glastonbury? We’ll need at least 20,000 people with talent, maybe sport and the arts will remain centred on humans. I am certain that cricket commentating will remain a human activity, but most radio voices can surely be replaced by A.I. I have never understood the relevance of disc jockeys, with a handful of exceptions. However A.I is out to kill us eventually. Allegedly. Can A.I. sue people for defamation?
Meanwhile our FTSE had meaningful down days and then a money flood on Friday, which faded. VIX has started to get lively with big swings, as it has been ‘on the floor’ for some time. The low volatility, complacency always precedes disaster. The market can remain complacent longer than we can remain patient. Bold traders may be filling their boots with cheap puts, others may be looking for cheap spreads. Personal experience has told me never to be a debit trader, don’t pay for stuff. It’s a bit like doing something and apologising rather than asking for approval, your choice. We don’t advise, we comment and educate by example. You know that.
In The Inbox
NOT a recommendation but it may be enlightening as these guys have been around a long time: https://broadcast.smbtraining.com/trifecta/trainingcamp/re.php They are looking for traders, that may be you. Let us know if it is.
Here’s Larry: https://mailchi.mp/optionstrategist/the-option-strategist-weekly-updater-4865780?e=5f15d5ff5d Interesting how he interprets low VIX as good for stocks. VIX is of course a derivative and not prone to flights of fancy whereas stock and/or Crypto traders can lose their minds chasing something.
And CME -quick commentary and the weekly invitation to ask anything options related: https://view.the.cmegroup.com/?vawpToken=4DTQR4NBHBTUXDS6M5OWGMOSWQ.110057
Distraction Trades
ADA was $0.2130 now $0.2091 Wild swings this week. Has this cheapie bottomed out? Or is it headed for $0.03 again?
XRP was $1.4061 now $1.3722 Crypto -it’s a mystery! I like this source https://coinmarketcap.com
DAX : Under review after poor record lately. 4 no entries one trade 300nett Old method 590 in 4 trades!
UK Gilts Were £15.39 now £15.20 ( Yes a horrible week) 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 $60.11 now $58.61 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 on the sidelines as I took my eye off the ball when it was $52.
Legacy Trade 424, 480 onwards, and New Trade 483
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!
Previously: 8400 2431.5 8600 2,232.5×2 = 2033.5 Yikes!
Last Week: 2481.5 and 2282×2= 2082.5 Nasty!
now 2352, 2152 (x2)= 1952 No words…….
8400 2355 8600 2155=1955 rolled to Sept (on Thursday) 8400 2379 8600 2180 = 1981
Credit 26 Rolling income 1352+26 = 1378
Previously: 2431, 2232×2= 2033
Last Week : 2431, 2232×2=2033 What are the chances?
Was: 2441,2241×2= 2041 Time to look at rolling to Oct. 2464.5, 2266×2= 2067.5 Can we do better in the next 2 weeks?
Now: 2253.5, 2053.5 (x2) = 1853.5. Rolling to October 8400 call 2280.5, 8600 call 2082(x2) = 1883.5 CREDIT 30 (Rolling credit now 1408)
Trade 480 We’re Going To try The Worst Trade, The 1-1-2
SanJose Options have featured this and also mentioned it can be a quick death. The trade is this: Buy one option, we use a Put, sell a lower put and sell 2 lower puts.
The strikes and numbers: buy 10750, sell 10600 sell 2x 10500 gives us: 85.5, 49 and 35×2= 33.5 Credit
Frankly I have never seen such a skewed market to the upside, so this may be an easy win.
NB SJ Options will talk about Vomma, Vanna and Lamda when what they mean is if the market takes a dump, you’re in the brown stuff. Rocket science it is not.
63, 31.5, 21(x2)= minus 10.5 (Our Credit was 33.5 so a nice result. We run it of course )
Now 54.5, 25, 16(x2)= 12.5 That went the wrong way!
10750 124 10600 46.5 10500 23.5 (x2) Gives us 30.5 Credit Total 63.5 WIN! run to expiry for fun
Trade 481 Strangle In The Back Half (?)
The TastyTrade standard is to sell (write) a strangle about 45DTE (days to expiry) when this was worth 94.5 for the Calls and 70.5 for the Puts.
We’re doing this with 21 days, to expiry, but here’s the twist, we’re also going to run the October strangle -same strikes 79.5 and 72. Total 151.5
So here’s our trade: .16 Delta put 10550, 25.5, and the .18 Delta 11050 call, 22. Clearly this has lost a ton of value, but hindsight is of course 20:20 vision.
As promised an analysis of the one example, which may well justify the Tasty Trade approach as they would have closed out at 50% profit.( They’d actually take the October trade on Tuesday)
Tuesday: Oct trade to open: put 78, call 72.5 was 62, 77.5 now 22.5 102.5 Theta is helping and vol is still low
Our Sept trade was : 20, 20.5 Now 1.5, 33 Going the right way but not great our credit to open was 47.5
Trade 482 My favourite
We’re going with a short term(Sept expiry) put ratio spread, we buy the 10650 for 32, sell 2x 10500 for 16 apiece. Zero cost, margin required. Now we have no upside risk, downside risk is at 10350. Max profit 150 It has its critics but Tom Sosnoff from Tasty Trade lists it as number 2 of his favourites.
Now: 66 and 23.5 (x2) =19 Credit We run this
Trade 483 Straddle And Be Damned!
We saw how last month it was sheer folly to buy the straddle so this week, and this is not recommended in these troubled times( Trump faces impeachment next week) We SELL the straddle 10650 call 71, put 66. So 137 Credit Our risk is at 10650 ± 137= 10513, 10787 This is a punt not a serious trade but if it goes wrong we’ll look at repair. Remember the market has to chase us for the money.
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.