SPX 1735/1740/2010/2015 Iron Condor
SPX 1805/1810 Put spread
I have to say July was not a great month for me in terms of portfolio growth, but I think it was a victory in other aspects. I started with the wrong foot from the get go with a 1735/1740/1975/1980 Iron Condor whose Call side had to be adjusted. This adjustment caused a temporary loss and made it tough to pull off a spectacular month. However, in spite of that initial loss, I managed to end up in positive territory. I also played my first Double Calendar successfully after studying these type of positions for about a year.
Portfolio return in the end was a discreet +0.57%, and that is after fees and all that jazz. As a credit spread seller, any month where you have adjusted positions you're usually bound to have bad results because of the typically unfavorable risk/regard profile of these trades. I consider it a huge success if I finish off these months with positive returns.
Because of the nature of high probability trades, I'm about to have two or three months in a row free of complications. It's in the month with losing positions, like this one, where much of the year result is decided.
The performance year to date is now +9.44%. Nothing spectacular, but I'm proud of the work done in this market. A market that has given very little opportunities to premium sellers. I think I have been fairly conservative with my positions and the way I have managed them throughout the year. Overall I want to believe I haven't been taking huge risks. So, taking that into account, +9.44% year to date is decent with five more months to go. Looking forward, both August and September are looking pretty good and could potentially sky rocket the YTD return to +15% by September expiration.
The SPX index opened the week at 1969.86 and closed at 1978.22 on Friday. That's a +0.4% gain despite all the geniuses talking about the end of the world, Ukraine, Russia, Israel, Palestina, bla, ♪ bla-bla ♪♪ bla.
Selling options as a contrarian takes guts. In life, most people are wired up to be too influenced by what is happening "now" and assume the current behavior will continue. Specially in negative situations. That's why when the market is falling people always think it will fall a little bit more, and when it does, they still think it will fall a little bit more and so on. Selling puts under such circumstances is mentally tough. Not only are you going against the herd. You are also going against yourself. Your natural conservation instincts. I've been doing this for a while, and every time I sell and out of the money credit spread against the trend, I have the feeling I made a mistake. Even if I enter at the perfect readings of the indicators I usually follow. Even if history has proven to be on my side. In the end it works. So, you have to keep doing it. You have to trust your system, hours of preparation and study. Ignore the MarketWatches of the world, Bloombergs, CNBC's etc. Selling the RUT 980/990 Put spread on Thursday was the trade! What are you gonna do? Sell now? The train has moved on kid. Well, you can still sell a decent put spread there, but the optimal point was during Thursday's session.
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McClellan: -80 (neutral)
36% of stocks are trading above their 20 Day Moving Average (neutral)
No man's land here. Market with potential strong moves in either direction. At this point I will simply wait for an extreme in order to sell front month options via credit spreads. I can also consider selling an Iron Condor in the back month with plenty of time premium to compensate the risk of potentially violent moves.
RUT 1050/1060/1260/1270 Iron Condor. 90% probability of success with 27 days to expiration. RUT hovering around the 1150 mark. Unlikely to threat my short strikes this week.
RUT 980/990 Bull Put Spread. Opened this position with a 90% probability of success and just one day later the market rebounds. The probability of success has increased to 97%. Very comfortable spread at this moment. Will ride it for a while.
Action plan for the week
Nothing needs to be done to the existing positions. They are healthier than I am, and very unlikely to receive any threat this week.
As for potential new trades, I'm not done with August yet. I'm willing to sell a credit spread in August and my candidate is the SPX 2040/2045 one. Comfortably above the uptrend channel. I just need a credit of 0.50 or better. That's the tough part. As of right now, the index would have to go up by about 20 points for that to happen.
I'll also consider adding an SPX Iron Condor with September options by Friday. My candidate right now is the 1795/1800/2055/2060, but that usually changes a little bit in five days. I'd like a credit of 0.80 or better for this position.
Tuesday: CPI, Home Sales
Wednesday: Chinese Manufacturing PMI
Thursday: European Manufacturing PMI, US New Home Sales, Initial Jobless claims
Friday: Durable Goods Orders
Good luck this week my friends!
Check out 2014 Track Record