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Friday, August 15, 2014

Weekend Portfolio Analysis (August 15, 2014)

And just like that the August 2014 monthly options expiration cycle is in the books. As I forecasted in the previous weekend portfolio analysis, I didn't need to do anything in the end, and both August positions expired today for max profit. I'm talking about the RUT 1050/1060/1260/1270 Iron Condor and the SPX 1815/1820 Bull Put Spread. August was a solid month of +3.84% portfolio return (+3.69% after commissions) and now the performance year to date is +13.48% for the whole portfolio. So far outperforming the S&P500 which is up 6.1% for the year. The results page has already been updated.

SPX went from an opening of 1933.43 on Monday to a close of 1955.06 on Friday for a  +1.12% gain getting us out of the extreme short term oversold readings recently seen.

Market conditions
Below is the usual chart of SPX. The yellow horizontal lines represent the areas where I have deployed September credit spreads. Both of them looking healthy.
(Click on image to enlarge)

Stochastics: 94 (overbought)
McClellan: +89 (neutral)
53% of stocks are trading above their 20 Day Moving Average (neutral)

The plan outlined last week was pretty good:
Solid bull candle on Friday to defend the lower boundary of the uptrend channel that began in November 16, 2012. Extreme short term oversold conditions were relieved and now this is more of no man's land here. Although it's technically no man's land we're obviously closer to a short term oversold extreme than to an overbought one. I think there's way more upside room than to the downside. I'm totally against selling Call Spreads at this point. I know I won't do it. Out of the money Put spreads in September or October are still fine. Volatility is still decent and you can play for example a 1750/1760 Credit Put spread with almost 90% probability of success and just 6 weeks to expiration. That's 170 points below current price (Almost 9%).

For this week, we continue to be in no man's land. But now, with more neutrality. Just like last week, I don't think selling Calls at this point is a good idea. And unlike last week, I can't really embrace the idea of selling Puts this time. There's plenty of room in both directions. In moments like this, I avoid selling a credit spread on one side of the markets. Instead I prefer Iron Condors far in time (8 to 9 weeks to expiration) so that that time premium allows me to move my strikes far away from current price action.


September Positions
RUT 980/990 Bull Put Spread. Very comfortable showing a 99% probability of success

SPX 1815/1820/2065/2070 Iron Condor. 87% probability of success now. Up from 79% last week, up from 68% the week before. I love this Iron Condor and I don't see immediate threats in the horizon. The market would have to move violently (5% to 6%) in just a week in order to start threatening one of the sides.


Action plan for the week
September positions are very comfortable to ride and I won't touch them. They are very unlikely to receive any sort of threat.

As for new trades, I'd love to open a RUT 1230/1240 Bear Call spread and complete an Iron Condor there along with the 980/990 Put side. But for that, RUT needs to hit 1170 (currently at 1141). If RUT doesn't hit that mark, I'm perfectly happy doing nothing with September options.

This upcoming Friday, we'll be exactly 8 weeks away from October expiration. Time to start thinking about potential positions for the new cycle.

Because we're in no man's land, you already now my candidate is an Iron Condor. My main candidate is the RUT 990/1000/1220/1230 one. Of course this is likely to change a little bit depending on how the market behaves in the next few days. If we fall, I'll probably just sell the Put side.


Forex
The LT Trend Sniper System it's still in the short EUR/USD position initiated on July 17.
(Click on image to enlarge)
According to the rules of the robot the system will exit the position on Tuesday if a new 8 day closing low has not been made. For that, the EUR/USD pair would have to close below 1.33624 before Tuesday 5PM Eastern time (GMT-5). The system would also close the position immediately if a new 8 day closing high is made. That's a closing price above 1.34087. Current price of EUR/USD is 1.33969.

If you're interested, the progress of this trade can be followed live at http://www.myfxbook.com/members/thelazytrader/lt-trend-sniper/929036. Scroll down to the Open Trades tab and you'll see something like this.
(Click on image to enlarge)

Long Term Investing
Finally, I purchased 56 shares of RioCan on Tuesday the 12th. RioCan is a Canadian Real Estate Investment trust that currently pays a very healthy 5.25% dividend. I've been invested in RioCan since October 3, 2013 when I bought 62 shares at $23.95. In ten months since then, my investment has grown 11.69% (from $1484.90 to $1658.50). In addition to that, I have received $72.90 in dividend payments, for a total return of +16.60%. Let's say I've been a happy shareholder so far. With this purchase, my position increased to 118 shares.

Here's how a  $10,000 investment in Rio Can 18 years ago would look today:

 Source: http://www.canadastockchannel.com/symbol/rei.un.ca/

And that's assuming no extra capital was ever added. My plan is to, instead, put additional capital to work every year. I may not hit it off the park with this one in particular. But, I'm invested in 17 different, solid companies with good track records of paying dividends and growing them above inflation every year. One of them has to hit it off the park. Then, I'll be a millionaire at age 50 and will stop writing on the-lazy-trader blog.


Economic Calendar
Tuesday: US Building Permits and CPI
Wednesday: China HSBC Manufacturing CPI
Thursday: European Manufacturing and Services CPI. US Home Sales and Philly Fed Manufacturing Index.


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

4 comments:

  1. My August IWM 105/103 credit put spreads expire today for max profits. I did not have any SPX cps for August even though I should have opened a similar spread you sold. I already had a big position in IWM and did not want to take on more risk.

    My August IWM 117/118 debit call spread was a dud. This was a lotto trade and did not pan out like I had hoped. It was a very small debit so it did not bother me that much. I was hoping to get a double out of the debit call spreads or use it as the first line of defense on an aggressive August IWM 120/122 credit call spread which I did not open because I was a bit nervous with the run-up. The 120/122 would have worked out nicely.

    “Just like last week, I don't think selling Calls at this point is a good idea. And unlike last week, I can't really embrace the idea of selling Puts this time. There's plenty of room in both directions. In moments like this, I avoid selling a credit spread on one side of the markets. Instead I prefer Iron Condors far in time (8 to 9 weeks to expiration) so that that time premium allows me to move my strikes far away from current price action.”

    This paragraph is the essence of our strategy. Readers new to this blog should read this a few times. It describes in a nutshell what LT and I are doing with our credit spread strategy.

    “If RUT doesn't hit that mark, I'm perfectly happy doing nothing with September options.”

    Did you mean October options?

    “Because we're in no man's land, you already now my candidate is an Iron Condor.”

    Yes indeed. We are closer to no man’s land. now should be know.

    “My main candidate is the RUT 990/1000/1220/1230 one. Of course this is likely to change a little bit depending on how the market behaves in the next few days. If we fall, I'll probably just sell the Put side.”

    I am looking to iron condor my Oct IWM 95/93 cps with Oct IWM 125/127 ccs. In order for me to sell ccs, I will need IWM to hit 118/119 area by the end of August or first week of September. Otherwise, I am okay with just having the put side.

    I am pretty comfortable with my current positions. The market has gotten out of the oversold condition and risen in the last few days relieving pressure on some of my positions. Below are my positions:

    August 29th IWM 104/102 credit put spread
    September IWM 98/96 credit put spread
    September IWM 103/101 credit put spread
    October IWM 95/93 credit put spread
    September SPX 1750/1745 credit put spread
    September SPX 1825/1820 credit put spread
    October 1725/1720 credit put spread

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  2. “If RUT doesn't hit that mark, I'm perfectly happy doing nothing with September options.”

    "Did you mean October options?"

    No, I meant September. That was the paragraph where I was analyzing potential September trades. I'm willing to Iron Condor with the 980/990 credit put spread.

    You have pretty comfortable positions my friend. And I see that little by little you did stop selling Calls this year. They're definitely much more challenging.

    Cheers,
    LT

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  3. Hi LT and Jonathan.
    Good week and month for you both. Congratulations. I did close my August position earlier last week. After commission it lost a total of about 1%. In the end I would have been successful holding out, but I didn't feel comfortable trying to work and keep an eye all week long.
    Right now I am completely in cash as far as options trading goes. I will take it easy and look for a better entry over time.
    Congratulations on your yearly returns LT.
    Dave

    ReplyDelete
    Replies
    1. Nice work Dave. It is good to be completely in cash sometimes.

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