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Saturday, September 21, 2013

Weekend Portfolio Analysis (September 21, 2013)

September expiration was yesterday an with it the Sept SPX 1560/1565/1760/1765 Iron Condor and the Sept RUT 935/940 Bull Put spread expired worthless for full profit. The total gain in the model portfolio was +$365 after commissions, which represents a +3.69% gain in respect with the initial balance for the month of $9880.

After September expiration, the model portfolio shows a balance of $10245, or in other words it is up +2.45% for the year. That's certainly terrible compared with the S&P's performance this year. But it represents a great improvement since February. The first two months of the year took the model portfolio to a draw down of -14.22% when it reached its lowest balance of $8578. From them until now the portfolio has grown from $8578 to $10245 for a +19.43% gain in the last seven months, which is pretty good. And all that, in the middle of a very low volatility environment, which makes it harder to collect premium and a most of the time furiously bullish market.

Market conditions
SPX opened the week at 1691.70 and closed at 1709.91 for a +1.08% gain.

(Click on image to enlarge)
Stochastics: 80 (overbought)
McClellan: +101 (neutral)
75.87% of stocks are above their 20 SMA (overbought)
64.25% of stocks are above their 50 SMA (neutral)

With the retracement of Friday the market relieved some of its extremely overbought conditions. But I still think it is closer to overbought territory that anything. McClellan showing some room for breadth to the upside, and the Uptrend channel also showing a little room. I believe more sideways or downside lies ahead, but I am no wizard. I think the upside is limited this week to a +1% if anything. And if that happens it will be a good time to sell out of the money Calls.

The two Iron Condors in the portfolio (one in October and one in November) have their short strikes (yellow horizontal lines on the chart) comfortably outside the projected path of the uptrend channel.

October Positions
SPX 1615/1620/1780/1785 Iron Condor. This position is in play since Wednesday, the craziest day of the year. Where I had to adjust the 1575/1580/1750/1755 Iron Condor. Yes, SPX was far from reaching my short 1750 strike. But it is what it is and I didn't want the position to get more heat. Yes, the market retraced after that, but nobody knew that was gonna happen. And had the market kept going up it would have been much worse. With SPX around 1710 this position looks very good,with an 80% probability of success ($400 credit here)

RUT 1120/1125 Bear Call Spread. Also in play since Wednesday. With RUT at 1072 and the market close to a bullish extreme, I like this position here. Currently an 82% probability of success ($200 credit)

There is a good chance of having an overall positive October expiration in spite of the adjustments that were needed this week. 

November Positions
SPX 1565/1570/1800/1805 Iron Condor. This one was entered yesterday, and obviously nothing to talk about here. Brand new position, no threats at all by now. 

Action plan for the week
Hopefully RUT falls a couple percentage points and I get to sell Puts in October. Probably around the 970 area. If on the contrary RUT rallies I will start looking for ideas on how to protect the 1120/1125 Bear Call Spread. The 1120 short strike is currently showing an 11.32% probability of expiring in the money. I will only roll if that number hits 30%. Otherwise I won't be concerned.

As for November positions. November is historically a bullish month. I would like to sell Puts in November but it probably won't happen this week. I like to see a bit more oversold market for that.

Economic Calendar
Tuesday - CB Consumer Confidence
Wednesday - Durable Goods, New Home Sales
Thursday - Jobless Claims, GDP

Good luck this week folks!

Check out 2013 Track Record

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1 comment:

  1. I like all of your October and November positions so far. I agreed that the market does look overbought here but it can still go higher. Now that we are in the final months of the year, institutional investors might be chasing higher. We might have a small correction or two left this year, but it is looking rather bullish.