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Saturday, December 28, 2013

Weekend Portfolio Analysis (December 28, 2013)

Today I'm writing the last Weekend Portfolio Analysis of the year from the good old US. I thought, hey don't be such a workaholic and take a break, but I just couldn't avoid coming here and start typing stuff.

This week the first February 2014 position was initiated via RUT 1040/1045 Bull Put spread for 0.30  credit. I never sell put spreads when the market are going up, I prefer to do it on weakness but in this case I'm just playing with the seasonality numbers and the fact that January, specially the first few days of the month are historically very strong days.

Based on that same fact, I didn't sell Calls this week. Also because the SPX 1880/1885 January Bear Call spread is starting to feel a little pressure, and I didn't want to add risk in the up side as eventually I might need to roll that position out to February.

Market conditions
SPX kept going up this week from 1822.92 to 1841.40. The market looks overbought here trading at the upper end of the uptrend channel.
(Click on image to enlarge)
Stochastics: 98 (overbought)
McClellan: +136 (neutral)
76.30% of stocks in the NYSE are trading above their 20 Simple Day Moving Average (overbought)
69.60% of stocks in the NYSE are trading above their 50 Simple Day Moving Average (very close to overbought)

With McClellan signalling a little breathing room, there is a chance for another push higher. Specially at this time of the year. However, I think the upside is limited, perhaps a 1% push higher the first week of the  year. I think a massive bull candle is unlikely, although anything can happen with the euphoria of the first days of the year.

January positions
SPX 1645/1650 Bull Put Spread No concerns here.

RUT 990/995 Bull Put Spread No concerns here

SPX 1880/1885 Bear Call Spread 15% probability of being in the money by expiration. I'm looking at this position like a hawk and will make an adjustment if 30% probability of being in the money is reached.

February positions
RUT 1040/1045 Bull Put Spread. This is the new February position entered yesterday. Obviously, well out of the money and no threats in the near term horizon.

Action Plan for the week
I'll pay special attention to the 1880/1885 January Bear Call spread. If it gives me a small profit that covers commissions, I'll close it for peace of mind. If we rally and the spread reaches a 30% probability of being in the money by expiration, I will have to adjust. I'll probably use February options and move the Call spread up to 1915-1920 or something in that area. I'll also combine that with the sell of a Put spread in the 1700 area. The key is minimizing the risk and minimizing the loss on the 1880/1885 spread. If I adjust that early (30% probability of being in the money) the loss will be a small one, and the new credit received will have the potential to cover that.

As for new positions, I would like to sell RUT calls in February to complete the Iron Condor. Maybe selling the 1240-1245 will do it. I'd like a .50 credit for it.

Economic Calendar
Monday: Pending Home Sales
Tuesday: CB Consumer Confidence, Chicago PMI, Chinese Manufacturing PMI
Thursday: European Manufacturing PMI, US Jobless claims, US ISM Manufacturing PMI

Good luck this week folks!

Check out 2014 Track Record

Related Articles:
Weekend Portfolio Analysis (January 4, 2014)
Weekend Portfolio Analysis (January 11, 2014)
Weekend Portfolio Analysis (January 25, 2014)
Weekend Portfolio Analysis (February 1, 2014)

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  1. I am going to skip January bear call spreads. I think we can get a nice pop the first few days of the new year as investors put more money into the stock market. I will look into selling some February bear call spreads mid or late January if we get overbought. I will look into selling some bull put spreads for January in the next few days.

  2. That's a good plan. Perhaps what I should have done myself too. Even so, Im pretty confident I'll have a positive January. We'll see.


  3. Hello LT, I'll say your 1880/1885 Jan C spread is 100% safe!

  4. Happy New Year LEN.
    I hope you are right and the 1880 Short Call is safe. But being January as it usually is, I have to really be careful. Thanks for dropping by