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Sunday, June 29, 2014

Weekend Portfolio Analysis (June 29, 2014)

The SPX index barely moved this week, from a starting point of 1962.92 on Monday to a close of  1960.96 on Friday. This is really boring,.......but boring is good. The less you have to move your pieces the better, because it means time decay is working in your favor on your existing positions and it also means you're being less ripped off on commissions. Let's move over to the market conditions segment.

Market conditions
(Click on image to enlarge)
Stochastics: 73 (neutral)
McClellan: +43 (neutral)
67% of stocks are trading above their 20 Day Moving Average (neutral)

No man's land. I won't enter new positions until we reach a more extreme market. The market is closer to a short term overbought extreme than to an oversold one. But unlike last week, it is now in a more neutral stage and has more room to move in either direction.

July Positions
SPX 1735/1740/2010/2015 Iron Condor 82% probability of success with only 19 days to July expiration. Looking good.

SPY 191/197 Double Put Calendar Spread Calendars are slow moving animals. I've had this one for a while and it has barely made any profit. But at the same time that means, they are not the weapons of mass destruction that Vertical spreads can be when they go wrong. I'm not concerned with this position. It won't hurt me. Unfortunately, what looked like a max potential profit of +$300 initially, has gone down to +$170 and that is because of the fact that volatility has gone down since I opend this position. Calendars are extremely susceptible to volatility changes.
(Click on image to enlarge)

SPX 1805/1810 Put spread Very comfortable. No concerns here.

August Positions
RUT 1050/1060/1260/1270 Iron Condor. 80% probability of success, no concerns here so far, still a lot of time decay left in this position with 47 days to expiration. The name of the game here is "Wait".

Action plan for the week
Again I'm not really concerned with July positions right now. If SPX hits 2000 then I will consider the July Iron Condor to be in danger and I will also close the SPY Double Put Calendar spread. I think SPX 2000 is unlikely this week, so time to do nothing.

The August RUT Iron Condor looks comfortable so far. Unlikely to be threatened in just one week. If we suddenly reach a market extreme, I will probably add an August position against the move whether it is up or down. But, again I think a market extreme is unlikely to be reached in just one week. So, to sum up, there will probably be nothing to do this week either. 

Economic Calendar
As usual the first week of the month, this one will be pretty active with a lot of data coming out. We'll see if this moves the markets significantly.

Monday: European CPI, Chinese PMI, US pending Home sales
Tuesday: US ISM Manufacturing PMI
Wednesday: European GDP, ADP Non Farm Employment change, Fed Chair Yellen speaks.
Thursday: Non Farm Payrolls, Unemployment Rate, ISM Non-Manufacturing PMI

Good luck this week folks!

Check out 2014 Track Record

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  1. Hi LT and Jonathan
    Three great weeks with little market movement. Perfect weather for us option sellers. I finished out my Jun position with a 2.4% gain, and opened a similar JUL wide butterfly / condor with a OTM call and put for insurance against larger moves. I personally would like to be able to produce 15% per year in any market condition (up / down, low vol / high vol) so I think your returns this year to date are admirable. I agree with you guys that SPX seems to want to test higher. Every dip is bought back in short order. We shall see. Keep up the good work, and have a good week. Dave

  2. Glad you had a nice June.
    A 15% per year, if you replicate that over a decade,....while at the same time adding funds every year, you could be set for life....obviously depending on your level of expenses and how much money you actually contribute to your trading account. But the point is 15% is a pretty solid return in a long time span. It is good to have those high yet attainable expectations.
    Thanks for the comment Dave. Always appreciated.

  3. Hi Dave and Henrik,

    A boring week is what we like here as time decay does its magic. But I can't wait for VIX to be around the historical average of 20 so that we can get even further away from the current price.

    I agreed that 2000 is probably not possible this week. I have no idea what the market will do next. I won't be surprise if we have a correction sometime this summer or a rally to 2000. I have learned that the market can do anything at anytime.

    I think 15% annual gain is very realistic selling spreads. 25% to 35% is also possible as I have seen Adam Beaty achieved this return since 2011 selling put spreads and naked puts on SPX/SPY and RUT/IWM.

    Last week, I closed the July SPX 2000/2005 credit call spread and opened an August SPX 2025/2030 credit call spread. I was trying to sell the August SPX 1825/1820 bull put spread when market went down to 1945 on Wednesday for .45 to .50 credit but never got filled. SPX seems very illiquid when you are trying to sell very far OTM spreads. I will try to sell the 1825/1820 or lower next week if we dip below 1950 again. If I can't get that spread fill I wont worry. I am not comfortable with anything higher than 1825 at this point as I feel the market is prone to sell off any day now.

    My other positions:

    July IWM 95/93 credit put spread
    July IWM 123/125 credit call spread
    August IWM 105/103 credit put spread
    August IWM 126/128 credit call spread