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Saturday, November 2, 2013

Weekend Portfolio Analysis (November 2, 2013)

SPX moved from 1759.42 to 1761.64 this week for a small +0.13% gain. So, the movements in the last two weeks have been +0.84% and +0.13%. Small/slow moves as I expected in my two most recent Weekend Portfolio Analysis articles due to the extreme overbought nature of the market.

Market conditions
With the small pull back on Wednesday and Thursday the market has relieved its extremely overbought condition.
(Click on image to enlarge)
Stochastics: 57 (neutral)
McClellan: -41 (neutral)
55% of stocks are above their 20 SMA (neutral)
66% of stocks are above their 50 SMA (neutral)

I find the market to be in no man's land right now and with decent room to move in either direction. At this point I would avoid selling close to at the money options.

November positions
SPX 1565/1570/1800/1805 Iron Condor 79% probability of success
(Click on image to enlarge)
With SPX in the 1760 area and 13 more days to go I still feel confident here. Although not totally comfortable. 40 SPX points means a little over 2%, which is totally possible for a 2 week period.

SPX 1520/1525 Bull Put Spread Sure winner. Will be left to expire worthless and save closing commissions.

RUT 1160/1165 Bear Call Spread With RUT trading at 1095 and a 95% probability of success, I am not concerned with this position anymore. I'll let it expire worthless in two weeks.

December positions
SPX 1600/1605/1835/1840 Iron Condor the 1835 short Call is the only thing that could be a concern at some point, as December expiration is still far (47 days). But there is nothing to be worried about at this moment. Probability of success 77%.

Action plan for the week
If the market goes up strong this week, and penetrates 1780 or so, it will be time to close the 1800/1805 Call side of the November SPX Iron Condor. I would eat a manageable loss and adjust further up and out to December.

If the market remains sideways, I will close the same 1800/1805 Credit Call spread when I see a profit of +$100 or so.

If the market moves down (-1% or so) I may close the 1800/1805 SPX Credit Call spread for profits, and I will sell a RUT Bull Put spread using December options. There was a point yesterday for example where it was possible to sell the RUT 975/980 Bull Put spread for 0.40 credit using December options. I think that strike price (980) for a short Put is pretty safe as it is almost 11% below current levels and such a large fall is unlikely in a historically very bullish month of the year. In fact the most the market has ever fallen in December is -6.03% in 2002. November is traditionally a strong month as well but there was indeed an instance where the markets fell 11% which happened in 1973. But you get the idea: a -11% fall at this time of the year is very unlikely at least based on historical data. (Numbers taken from 

Economic Calendar
Thursday: Jobless claims, GDP
Friday: NonFarm Payrolls, Unemployment rate, Chinese CPI

Good luck these week folks!
Check out 2013 Track Record

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