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Saturday, November 16, 2013

Weekend Portfolio Analysis (November 16, 2013)

All three remaining November positions expired yesterday yielding full profit. November was a good trading month that resulted in a 4.41% portfolio growth after commissions improving the track record for the year (+8.97%). My goal is to finish above the 10% mark in what has been a very challenging 2013 for option premium sellers and despite some reckless trading that had me down -14.22% early this year. From that moment (February expiration) up until now (November expiration) the performance has been +27.03% (and that is total portfolio growth, and also after commissions). Pretty decent.

Market conditions
Moving on to the action the last five days, SPX went from 1769.96 to 1798.18 for a +1.56% gain, in what was one of the strongest weeks of the last few months. The uptrend channel I had drawn was clearly broken to the upside. It is what it is, trend-lines are just guidelines, they are meant to be broken at some point, they are not concrete walls. Below is a chart of the SPX index, as usual the horizontal yellow lines represent the strike prices of my short options, that is, where I don't want the market to go.

(Click on image to enlarge)
Stochastics: 99 (overbought)
McClellan: +39 (neutral)
58% of stocks are above their 20 Simple Day Moving Average (neutral)
65% of stocks are above their 50 Simple Day Moving Average (neutral)

It's  unbelievable after this run up, but there is still room to the upside. The market is not overbought in my opinion and a 2% - 3% move up without any rest or pull back is still possible. I am not saying the market will continue to go up. I never try to predict market direction. I am just saying that we're not at an extreme yet, and therefore there is room in either direction. Careful with those aggressive Bear Call spreads at this point.

December positions
SPX 1675/1680/1850/1855 Iron Condor. This trade resulted from an adjustment I made this week. Basically I closed the old 1835/1840 bear call spread for a small $120 loss, and then I entered these two spreads that make up an Iron Condor. I gave myself a little bit more cushion in the upside while at the same time accumulated more credit in the put side (1675/1680). This position yields a total credit of $425 which will more than make up for the $120 loss. Because it was entered a couple days ago, there is not much to talk about here as it is obviously not threatened.

SPX 1600/1605 Bull Put Spread. This spread was part of the original 1600/1605/1835/1840 Iron Condor, whose call side I closed for the already mentioned $120 loss this week. With SPX almost 200 points above the short put (1605),the market would need to correct 11% to affect it, which is highly unlikely by this time of the year. No concerns here.

Action plan for the week
My goal is to let the existing positions mature and feel the effects of time decay. Like I said before, I am not concerned at all with the 1600/1605 Bull Put spread. My main focus is the 1675/1680/1850/1855 Iron Condor. If the 1850 short Call options are threatened (30% probability of being in the money) I will adjust further up. At that point I won't roll up the 1675/1680 Put side because a pull back will be imminent should the market keep going up that much without rest. If the 1850 short Call doesn't get the heat, and never gets to the 30% probability of being in the money, I will simply stay put and let time decay do its thing. Patience is the key.

As for new positions, this Friday we will be exactly 8 weeks away from January 2014 expiration, and it will be time to start thinking about possible January positions. Yes, I may have already made my last trade using 2013 options. The VIX is right now disgustingly low at 12.19 which makes it less than optimal for selling premium. I'd like that number to go up a little. If it stays this low, chances are I won't enter any new trade for the January 2014 cycle this week.

Economic Calendar
Tuesday: German ZEW Economic Sentiment
Wednesday: CPI, Retail Sales, Existing Home Sales, Chinese HSBC Manufacturing CPI
Tursday: PPI, Initial Jobless claims, Manufacturing PMI

Good luck this week folks!

Check out 2013 Track Record

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