This was expiration week, and finally my RUT 1055/1060/1280/1290 Iron Condor expired. This was a very challenging position that started as a RUT 1020/1030/1245/1255 Iron Condor. At one point I adjusted it to 1080/1090/1280/1290 (rolling up the Puts in an overbought market was a mistake). And then finally I had to roll down the puts to 1055/1060 ending up with the aforementioned Iron Condor that expired. Due to being tested twice in the same expiration cycle and not making any other complimentary trades, April resulted in a 3.38% loss for the portfolio.
Although losing money sucks, losses are inevitable in trading. The key when selling out of the money options is to not let those negative months get out of control. I think this draw-down is nothing out of control.
Market conditions
Yellow horizontal lines below represent the short strikes of my May SPX Iron Condor.
(Click on Image to enlarge)
Stochastics: 68 (neutral)McClellan: +45 (neutral)
41% of stocks are trading above their 20 Day Moving Average (neutral)
Total neutrality and price action in the middle of the uptrend channel. We're in no man's land here and as such, there is plenty of room to continue this rally or start a hard sell off at any time. Under these circumstances I always avoid selling close to at the the money options and prefer to wait for an extreme market to materialize, or play it with an Iron Condor but very far out of the money and with plenty of time premium to compensate the risk and increase the distance between current price action and my strike prices.
May Positions
SPX 1695/1700/1960/1965 Iron Condor 90% probability of success, 28 days to expiration. With SPX at 1865 there are no concerns with this position.
RUT 1000/1010 Bull Put Spread Out of trouble. 98% probability of success.
June Positions
RUT 920/930 Bull Put Spread 99% probability of success and well out of the money with RUT currently around 1138.
All the positions are looking good, and May in particular is pointing to be a solid +4% month for the portfolio. Time will tell.
Action plan for the week
I would like to close the June 920/930 Credit Put spread before expiration in June which is too far away. The spread is now showing a 50% return out of its max profit potential, but because it is so comfortable to ride, I will leave it there for a while until it reaches 80%-90% of its maximum profit potential.
That's all in respect with existing positions. As for potentially new positions, well, this Friday we will be exactly 8 weeks away from June expiration. For the June cycle I will go back to the SPX index or its corresponding SPY Etf if I have a hard time getting my fill. Right now, because the market is in no man's land, I would be inclined to start with an Iron Condor. My candidate now is 1680/1690/1960/1970. But of course that may change from here to Friday.
Economic Calendar
Tuesday: US Existing Home Sales, Chinese Manufacturing PMI
Wednesday: New Home Sales
Thursday: Durable Good Orders
Good luck this week my friends!
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