April expiration is now in the past and it resulted in a decent month for the model portfolio (+4.09% before commissions). The two remaining positions (SPX 1445/1450/1610/1615 Iron Condor and the SPX 1440/1445 Bull Put spread expired worthless for full profit on Friday morning and the focus now shifts to May expiration.
SPX opened the week at 1588.84 and closed at 1555.25 for a -2.11% loss. We got to see decent moves during the first three days of the week and the SPX index left the uptrend channel that started back in November 16 last year.
(Click on image to enlarge)
The question now is, will this be the start of a sweet downtrend? or the start of a few months of sideways action in the market? Obviously nobody knows, but what we do know is that these swings, a higher VIX and the death of a medium term uptrend are like music to the ears of Options sellers. So, hopefully Credit Spread sellers will have it a little bit easier for a few months.
Stochastics at 18 (oversold)
McClellan at -44 (neutral)
34.02% of stocks currently above their 20 Simple day moving average (neutral but close to oversold)
42.56% of stocks currently above their 20 Simple day moving average
No man's land, but close to oversold conditions.
On the way down, the 1530 area should provide some support and then the 1490 - 1500 zone could also be strong there. Everybody seems to be thinking that we will go a little further down, but the market has a funny tendency to go against what most people think. I personally believe we'll go a little further up first and then down below 1530. Obviously, what I think or what anybody else thinks is irrelevant and that's why I like to play Out of the Money Credit Spreads to have some decent room for error.
May Positions
RUT 850/855/1000/1005 Iron Condor
(Click on image to enlarge)
Looking good here, with roughly an 80% chance of successful expiration in 26 days. I believe the short Call Strike at 1000 will be safe, it would need a +10% rally of RUT in 26 days, which I think is very unlikely. The short Put strike at 855 however, could be tested with ease in my opinion. It's only 5% away.
SPX 1440/1445 Bull Put Spread
The trade was entered this past Thursday, and so far it's not looking like a bad idea.
(Click on image to enlarge)
With a 95% probability of success, this is the Credit Put Spread I would like to take all the way to expiration in May.
Action Plan for the week
There are two Bull Put spreads and only one Bear Call Spread in the May portfolio. That's twice the risk to the downside. Obviously, I dislike that, so at this point my main goal is to get rid of one of the Bull Put spreads. The RUT 855/850 is only 5% bellow current RUT's price. The SPX 1445/1440 is 6% below current SPX's price. On top of that RUT generally moves faster than SPX ( on a percentage basis). So, the RUT 855/850 spread has a higher chance of being tested and therefore that's the one I would like to close as soon as I can. I'm not desperate though, there is still room, and I will wait until that spread shows some gains, hopefully with a little bounce back up this week I will be able to close it for a scratch or positive balance.
As for June positions, I'll start looking to adding the first one by Friday this week. If by then the market is not at a Bearish or Bullish extreme, I will enter a wide SPX Iron Condor. if we happen to be at a market extreme, I will opt for an out of the money spread against the trend.
Economic Calendar
Plenty of releases this week, plus a busy week of earnings.
Monday - Existing Home Sales
Tuesday - New Home Sales and German PMI
Wednesday - Durable Good Orders
Thursday - Initial Jobless claims
Friday - US GDP
Good luck this week folks!
Check out Track record for 2013
SPX opened the week at 1588.84 and closed at 1555.25 for a -2.11% loss. We got to see decent moves during the first three days of the week and the SPX index left the uptrend channel that started back in November 16 last year.
(Click on image to enlarge)
Stochastics at 18 (oversold)
McClellan at -44 (neutral)
34.02% of stocks currently above their 20 Simple day moving average (neutral but close to oversold)
42.56% of stocks currently above their 20 Simple day moving average
No man's land, but close to oversold conditions.
On the way down, the 1530 area should provide some support and then the 1490 - 1500 zone could also be strong there. Everybody seems to be thinking that we will go a little further down, but the market has a funny tendency to go against what most people think. I personally believe we'll go a little further up first and then down below 1530. Obviously, what I think or what anybody else thinks is irrelevant and that's why I like to play Out of the Money Credit Spreads to have some decent room for error.
May Positions
RUT 850/855/1000/1005 Iron Condor
(Click on image to enlarge)
SPX 1440/1445 Bull Put Spread
The trade was entered this past Thursday, and so far it's not looking like a bad idea.
(Click on image to enlarge)
Action Plan for the week
There are two Bull Put spreads and only one Bear Call Spread in the May portfolio. That's twice the risk to the downside. Obviously, I dislike that, so at this point my main goal is to get rid of one of the Bull Put spreads. The RUT 855/850 is only 5% bellow current RUT's price. The SPX 1445/1440 is 6% below current SPX's price. On top of that RUT generally moves faster than SPX ( on a percentage basis). So, the RUT 855/850 spread has a higher chance of being tested and therefore that's the one I would like to close as soon as I can. I'm not desperate though, there is still room, and I will wait until that spread shows some gains, hopefully with a little bounce back up this week I will be able to close it for a scratch or positive balance.
As for June positions, I'll start looking to adding the first one by Friday this week. If by then the market is not at a Bearish or Bullish extreme, I will enter a wide SPX Iron Condor. if we happen to be at a market extreme, I will opt for an out of the money spread against the trend.
Economic Calendar
Plenty of releases this week, plus a busy week of earnings.
Monday - Existing Home Sales
Tuesday - New Home Sales and German PMI
Wednesday - Durable Good Orders
Thursday - Initial Jobless claims
Friday - US GDP
Good luck this week folks!
Check out Track record for 2013
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