← Summer reading -meanwhile back to the business in hand
Tiny Range. Low Volatility
FTSE cash index- 7378 open close 7453 high 7515 low 7378 (last week 7350 open close 7378 high 7439 low 7305)
FTSE volatility- open 9.64 close 10.13 (last week open 11.77 close 9.64 )
What Trades Would Have Done well?
Anything utilising theta (Time decay) I have some thoughts on this. (See Summary) We had a typical expiry where the index gets ‘ramped’ –allegedly (ahem) to let the institutional sellers of puts off the hook. Taking a long position anytime from Monday. The 7450 call was a buy on Monday at 6. Expiry was about 7510. Or…… running short puts to expiry. The 7300 put at 13.5 was a nice sell. Or…both! Expiry weeks are typically up.
Market Volatility
from 8.19 to 10.94 (last week 8.58 to 11.95) In percentage terms it seems a lot but August options premiums have just eroded.
News
The ONS data showed that total government debt, excluding public sector banks, stood at £1.75 trillion at the end of June, which is equivalent to 87.4% of gross domestic product (GDP). Not sure why you’d exclude public sector banks-aren’t we owed £400billion?
The Trump circus produces more crazy stuff, but this fails to move markets
Summary
Last week’s trade- a cheap put ratio spread-running to expiry. It was a debit trade at 1.5,and it did trade briefly for 4 last week. A tiny loss on a purely speculative trade. On rare occasions, the market gets a dose of truth and thus drops. This is observed to be very rare in expiry weeks.
Another trade I was alerted to was the sale of options, on the Friday before expiry week. Not for this trader, thanks. However, as always, do your own research.
I tend to read some ‘parallel’ topics as trading material is tedious and I have read pretty much all there has been on options. Just finished ‘Scarcity’ By Sendhil Mullainathan, Eldar Shafir. A worthy read which makes plain some of our shortcomings in understanding the actions and inactions of others.