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Sunday, December 9, 2012

Weekend Portfolio Analisis (12-09-2012)

I'm back into the game folks. After a month of pause in my trading, this past week, as you know I entered my first trade for the January 2013 expiration cycle. It was a RUT 870/875 Bear Call spread for 0.70 credit. The SPX index almost didn't move this week: from 1416.34 to 1418.07 and everybody seems to be scared of entering either long or short positions in fear of unpredicted outcomes out of the Fiscal Cliff talks.


The RUT Credit Call spread position looks like this at the moment:

(Click on image to enlarge)

Temporary profit of $12.00. Probability of success at expiration 80.93%.


My Plan for the week

If the market makes a 2% - 3% rally, I will be selling a Credit Call spread, probably selling the 1510 SPX January Calls. In this event of a market rally I won't touch the RUT position unless RUT hits 868, in which case I will be adjusting further up.

If the market stays in a plus minus 2% range I won't do anything this week.

If there is a sell off, I will only sell Puts if we sell off hard, down to something like SPX 1370.


Market conditions now

In terms of fundamentals, we have the Fiscal cliff negotiations, and everything seems to be in pause because of that. Even though the US unemployment went down to 7.7% and the Canadian one went down to 7.2% this week, the markets didn't seem to care. Which to me means that many traders are concerned about putting bets at this moment. I don't want to gamble on the possible outcomes of the Fiscal Cliff. If you have been following me for a while you know I disregard fundamentals almost 100% in my analysis for making decisions. I believe it is a very complex and unpredictable game. I simply stick to overbought/oversold markets, support, resistance, and selling out of the money options, that's it.

This is the chart of the S&P500 index at the moment:

(Click on image to enlarge)

Although technically we are not at an extreme, we are closer to overbought than we are to oversold. Also with 70.65% of stocks above their 20 SMA. So, it is my believe that in the event of a rally we won't get a spectacular +5% rally or anything like that, from now to year end. Stiff resistance in the 1425 - 1435 area is expected, after that it could be all the way up to the 1450 - 1460 neighborhood.

Possible market movers this week

Of course, it will mostly be headlines about the Fiscal Cliff, and that is definitely the main topic now. Apart from that we also have the following events:

Monday - 7:00pm FOMC - Fed Funds Rate
Tuesday - 5:00am German Economic Sentiment and Current Conditions
Wednesday - 2:00am German HICP and CPI. 12:30PM FOMC Rate decision. 2:15pm Bernanke's speech.
Thursday - 8:30am USA PPI and Retail Sales.
Friday - 8:30am USA CPI.

Happy trading folks!



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