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Saturday, March 3, 2012

Weekend Portfolio Analysis (03-03-2012)

Things are getting clearer for the March expiration portfolio as only two weeks remain. The market was a little weird this week as we saw the SP500 advance +0.4%, Dow Jones +0.1% however the Russell 2000 index went down -3.0% in the week. This makes me a little concerned about my positions in the IWM etf (which tracks the Russell). Let's go one by one:

IWM 76/74 Bull Put spread

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This position has a temporary profit of $91. However at just 4.5 points of distance between current price and breakeven point, it can be easily threatened specially considering how weak the Russell has been behaving, something that can get worse if the rest of the indices start to fall this week. Roughly 4.5 points in 80.25 points of IWM would mean a fall of  5.6%. Given that the Russell index moves harder than the SP500, this could mean a fall of 3% - 4% on the SP500 something which is obviously entirely possible. Taking this into account, plus the fact that the Russell has been surprisingly weak, this position will probably have to be closed this weak.

IWM 88/90 Bear Call Spread

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This one feels really comfortable. 88 seems very unlikely for IWM to hit in two weeks. It would mean an upward move of +10%. This is the most comfortable position in the portfolio, and the plan is, obviously, to take it to the end of the expiration cycle.

Overall, the two IWM positions combined form an Iron Condor with break even points between 75.50 and 88.49

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84.59% chances of a positive outcome in the next 13 days, and the lower breakeven point, although starting to worry me, is below the uptrend channel. So, although I have to start looking at the 76/74 more carefully, things are not too bad.

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SPY 141/143 Bear Call spread

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With an unrealized profit of $161, and a breakeven point of 141.19 this one is not looking bad. Although the SPY has been moving in an uptrend channel that, in case of continuation, might end up very close to the breakeven point by expiration.

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The whole portfolio beta-weighted vs SPX, shows profitability with SPX between 1304 and 1413 in the next thirteen days.

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This week, with the ISM-Non manufacturing report on Monday, Initial claims on Thursday and Non-Farm payrolls on Friday things could get interesting. I'll have to be careful with the 76/74 IWM spread. Ideally the markets move up a bit (SPX around 1380) and stay there, this way the SPY 141/143 position is not threatened while at the same time the 76/74 IWM spread takes a break and wins some time.

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