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Saturday, March 15, 2014

Weekend Portfolio Analysis (2014-03-15)

SPX opened at 1877.86 on Monday and closed at 1841.13 yesterday for a 1.96% loss in the index. Now the S&P is down 0.5% for the year. It was a very busy week for me at the office, which kept me away from the markets. I could look at the major indices just a couple of times a day, but that was about it, no time to enter new trades or analyze anything.

Market conditions
(Click on image to enlarge)
Stochastics: 27 (neutral)
McClellan -94 (neutral)
48% of stocks trading above their 20 Day Moving Average (neutral)

Obviously, not overbought nor oversold which are the extremes I am waiting for at this point. I wouldn't sell close to at the money options under these circumstances. With the spike in VIX, almost at 18 right now it is a good time to sell Iron Condors, and also out of the money Puts since you can position them far out of the money with good probabilities of success. For example the 1670 April Put has a 90% probability of success and it is 9% below current prices with just 33 days to expiration. Pretty good odds.

March positions
RUT 940/950 Bull Put Spread with RUT trading at 1181 these options will expire worthless for full profit this week.

SPY 159/161 Bull Put Spread SPY is trading at 184.66, so this position looks very safe as well. Nothing to do here.

RUT 1240/1250 Bear Call Spread 88% probability of success with just 6 days to expiration. RUT would have to go up 59 points this week. That is, more than 5%, an unlikely event in my opinion.

So, all the March positions look very safe and stress free. They should all yield full profit this week. I will finish off the March monthly expiration cycle with a positive +1% portfolio growth after commissions despite suffering two losses in what has been the most challenging month so far this year. I haven't been stellar, but not bad either. I'll close the first quarter of 2014 with an almost 6% portfolio growth, which is a very decent 24% annualized.

April positions 
RUT 1080/1090/1280/1290 This one's looking pretty good, right around the middle of the Iron Condor, so no concerns here. I need to let time do its work.

Action plan for the week
There's an interesting play right now in March with the SPY 174/176 Credit Put spread, yielding 0.13 credit. With SPY at 184.66 this trade is offering decent odds below the uptrend channel. I usually don't sell credit spreads one week to expiration because of the low premiums, because adjustments become hard and you have to end up rolling out to the next month. But in this case, with a VIX that has expanded nicely, you can set this position far enough and still get something for it. I'm still not sure whether I will open this trade, but if markets wake up weak on Monday it will be more tempting and almost for sure I will pull the trigger.

If we see the market weakness later in the week, then I will sell a credit Put spread in SPX but using April options. Hopefully below 1670 for a 0.40 credit or better. I think those are great odds.

I won't touch the existing March positions this week. It will all expire worthless. The April RUT Iron Condor, nothing to do there either.

Finally I won't enter new trades if we stay sideways, or go up from here, except if we go up really hard challenging the 1880 price level on SPX, which I think is unlikely. If that were to happen, then selling SPX Calls above 1950 would be my play.

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Economic Calendar
Monday: Europe CPI
Tuesday: US CPI, Housing Starts
Thursday: Existing Home Sales, Philadelphia Fed Manufacturing Index

Good luck this week folks!

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  1. Great job Henrik. Your March positions are probably going to expire worthless. It was a tough month for going short.

    This week, I think we will see some fireworks. I have no idea if we are going higher or lower. It really doesn't matter since I am delta neutral for the most part. I personally would like to see us go down hard this month.

  2. Thanks Jonathan.
    Yeah I think March positions are in no trouble at all just 4 days to exp. now.
    Looks like we are going up again and the short term downside correction is over. Oh well, I missed the opportunity.

    I've seen you pretty active with your trades on Twitter lately. I hope you're doing well in all those positions.
    Good luck my friend.


  3. My bread and butter trades are still selling spreads on IWM/SPY/QQQ. I am going to stop trading NDX, RUT and SPX due to not getting fills and strange behaviors with those indexes.

    I also like to sell spreads on some very liquid stocks like AAPL and GOOG. But I try to limit those trades to 5 positions outstanding at most.

    Thanks for the follow on Twitter. I wish you tweeted a bit more but I know it might be hard to do it real-time since you have a busy job. I rely on your weekly analysis to know what you are thinking and planning to do.

  4. That's right Jonathan. I look at all the traders in twitter with envy. Looks like they can spend most of the day trading and connected to the market. For me it is simply impossible right now. I hope to be fully dedicated to this one day. Then I'll tweet more and trade more and hopefully better.