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Saturday, August 17, 2013

Weekend Portfolio Analysis (August 17, 2013)

Yesterday was expiration day for August monthly options. With it, the August SPX Iron Condor(1560/1565/1745/1750) expired worthless for full profit (+$425). August resulted in a +3.37% performance before commissions for the model portfolio and +2.40% after commissions (considering a very unfavorable $1.50 per contract). Not quite the great month I expected, but not bad at all either. Repeat that 12 times a year and you have an excellent result.

SPX went from 1688.37 down to 1655.83 this week for a -1.93% loss.

Support in the 1675-1680 zone was broken and now we're right around former resistance in the 1650 area. The market also closed yesterday below its 50 SMA for the first time in more than a month.

Here's how the chart looks
(Click on image to enlarge)
Stochastics: 7
McClellan: -246
32.08% of stocks above their 20 SMA
54.01% of stocks above their 50 SMA

Short term we are looking oversold and due for a rebound. And I think this is a good time to sell out of the money Put spreads, which is what I did yesterday with RUT.

However, medium term, the market has more room to go down, as evidenced by the number of stocks above their 50SMA (54.01%) and the 200SMA (71% still very high). So, room to the downside, there is. But in the immediate future (this week and/or next) I think it will take a pause on its way down, possibly with a little rebound. Will this happen? Who the hell knows.I am no guru. I just play with probabilities and out of the money positions with decent room for error. Like with the RUT trade, my short strike is 8% bellow the market, so I have an 8% room for my mistake. I like to play those odds with the way I'm seeing the market right now through the usual 3 indicators I follow.


September Positions

September SPX Iron Condor(1560/1565/1760/1765)
With SPX at 1655 this one's looking great. 81% probability of success.
(Click on image to enlarge)


RUT 935/940 Bull Put spread, the trade opened yesterday. Obviously nothing to analyze here at this point.


Plan for the week

With two positions already in September I am taking a break here. The SPX Iron Condor won't be touched this week unless the market moves violently to one of the sides, unlikely in the middle of August, with so low volumes and a very light Economic Calendar. And the RUT trade is too young so it won't get into complications this week. There's more downside exposure than upside risk in the portfolio at this point as two Bull Put spread are present but I really think it is a very decent position to be in. Obviously I don't want to add a third Bull Put spread. If anything, I would add a Bear Call spread in RUT but that won't happen this week, as I would need a very significant market rally in order to do that. Probably +5% which is also unlikely to happen this week. To sum up, chances are I won't do anything in the portfolio for the next few days.


Economic Calendar

Pretty light this week.

Wednesday -US Existing Home sales, Chinese Manufacturing PMI
Thursday -US Jobless claims
Friday - German GDP, US New Home sales.

Good luck this week folks!

Check 2013 Track Record



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