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Saturday, July 26, 2014

Weekend Portfolio Analysis (July 26, 2014)

A quiet week, free of drama with SPX going from 1976.93 to 1978.34. Just a +0.07% move. With 8 weeks to September expiration I opened a 1815/1820/2065/2070 Iron Condor. Just being mechanical, as usual, 8 weeks to expiration, no man's land, there goes my Iron Condor. Using the 10% probability of being in the money strikes and in this case, they are comfortably outside the boundaries of the uptrend channel. So, all is good.

Market conditions
(Click on image to enlarge)
Stochastics: 82 (overbought)
McClellan: -100 (neutral)
34% of stocks above their 20 SMA (neutral)

Funny because we have two indicators close to oversold while the other one is overbought.
Anyways, to me, this is no man's land. For me, it's no time to enter credit spreads at this point. Just a personal preference. I'll wait for an extreme.

August Positions
RUT 1050/1060/1260/1270 Iron Condor. 94% probability of success with 20 days to expiration. RUT hovering around the 1145 mark. Unlikely to threaten my short strikes this week.

September Positions
RUT 980/990 Bull Put Spread. Probability of success 97%. Very comfortable spread at this moment. Will keep riding it for a while.

RUT 1815/1820/2065/2070 Iron Condor. Brand new positions just two days old. Nothing new here.

Action plan for the week
I feel very comfortable with the existing positions and they are very unlikely to be threatened this week. As for new positions I will wait for a market extreme, which according to the indicators I follow, is not there yet.

So, this is looking like one of those weeks where I do nothing. And I know that's bad for the blog. I don't get to write anything. It's bad for my twitter feed, I don't tweet new trades. But these are the types of weeks that I've come to love. I hate over-trading. I hate looking at charts every 5 minutes. I hate the stress that comes with it. I hate making the broker rich with commissions on top of commissions. I know, I know lately many people claim that being very active is the key to success (that's influenced by TastyTrade's mantra of trade small - trade often). Sorry, mentally it doesn't work like that for me. If I have three solid,comfortable to ride positions, there's no need to force anything else. No need for me to be on top of 20 different stocks, which for the most part will move in tandem with the rest of the market anyways.

Economic Calendar
Lots of news coming out this week, that could move the market, hopefully to an extreme.

Monday: US Pending Home Sales
Tuesday: CB Consumer Confidence
Wednesday: ADP NonFarm Employment change, GDP
Thursday: Europe CPI, Chinese Manufacturing PMI
Friday: Nonfarm Payrolls, Unemployment Rate, ISM Manufacturing PMI

Good luck this week my friends!

Check out 2014 Track Record

Go to the bottom of this page in order to see the Legal Stuff


  1. Firstly, a couple of spelling mistakes:

    1. 'A quite week' should be 'quiet'
    2. 'Unlikely to threat' should be 'threaten'

    I only did one index credit spread trade this week. I sold the September SPX 1825/1820 for .40 credit to iron condor with my 2055/2060. I saw that you were able to do slightly better than me on September SPX. In fact, even your September RUT trade is farther OTM than my September IWM. Some months I am able to get further OTM than you on certain trades and vice versa. But we are pretty close most months on our strike selection.

    Of the 3 primary traders that I follow (you, Nic and Adam), your trading style mirrors mine the most. While we might put the trades at different times and use different strikes and even different securities, our overall strategy is about the same. Sell credit put spreads when oversold. Sell credit call spreads when overbought. Sell iron condor when in no man's land.

    Sell about 8 weeks from expiration. Some months, I might sell about 10 weeks from expiration when we are deeply oversold. Some months I might sell about 4 weeks or less from expiration. So it all depends.

    I think I am going to go back to RUT and SPX when selling October expiration. IWM and SPY is good but I think I prefer trading RUT and SPX even though they have their disadvantages too.

    The way we manage the trades is a little different. I give it a bit more room for the price to move towards my short strikes while you like to do something when delta of short strike is around 30. I might have to revert to your strategy especially for the put spreads since one of these days we will not bounce too easily.

    I still remember what happened during August through November of 2011. RUT went down 20% in less than 2 months that summer. It will happen again one of these days. I need to keep that in the back of my mind when placing these credit put spread trades.

    My current positions:

    August IWM 105/103 credit put spread (I closed the August IWM 126/128 for almost max profits earlier this month)
    September IWM 103/101 credit put spread
    September SPX 1825/1820 & 2055/2060 iron condor

    I also have an August IWM 116/117 debit call spread that will make money if IWM rallies over the next 3 weeks and closes above 116. I am trying to make a 100% profit on this trade. I bought it for .21 debit. I want to close it with .42 credit.

    I need to make a decision next week whether I want to iron condor my August IWM 103/101 credit put spread with a bear call spread. If I do sell a bear call spread, I will sell the August IWM 121/123 or 120/122 bear call spread. I will feel more confident with this position as the August 116/117 debit put spread will be like a hedge if IWM rallies into August expiration.

    1. Thanks for the corrections. Just fixed those typos.

      Yep, it's really funny how in spite of having different rules our positions have been so similar for the last 3 - 4 months.

      I do something with my positions when one of the short strikes reaches a 30% probability of expiring in the money. You're correct about that. But before you tweak your rules, be aware of the implications. My trading style implies that I will have more losers. In fact had I not adjusted my positions earlier this year, I would have only had one loser so far! And my performance would be > 15% at this point in the year. It is a little frustrating to adjust your positions to see the market reverse right after that and not threaten you anymore. This adjust -early style has the potential of avoiding significant draw0downs in the portfolio. But it is at the cost of smaller, yet more frequent losers. I am fairly conservative, so it's fine with my mentality.

      It is nice to see you applying your directional debit spreads!
      if you've back-tested those ideas an feel comfortable, go ahead. Will be good to see your results.
      I think you've been doing a good work this year buddy. I know you will have positive results come year end.


  2. I made a typo in the last paragraph of my first comment. I said - "I want to iron condor my August IWM 103/101 credit put spread with a bear call spread."

    I have the August 105/103 credit put spread. Not 103/101. That is for September. My typo.

  3. Who are Nic and Adam? Can you share?

  4. Nic and Adam are two conservative credit spread traders that have subscription trading services on I know at one time Henrik was advertising their services here on his blog. I wish I had discovered them at the beginning of my credit spread trading journey. It would have saved me from losing a ton of money.

  5. To be frank I too feel that being active is key to success because the market changes very rapidly sometimes its drastic change results into loss.

  6. Thanks for the comment AkramMajed.
    Well, you are entitled to your opinion sir !!!!!
    An obviously there isn't one style that works only. If being active works for you that's great.
    Notice however, that by being passive I don't mean I wait there and do nothing when my positions are threatened. I'm very quick to adjust when things go wrong.
    Now, when it comes to new positions entries, I do take my time and enter at what I ocnsider ideal circumstances