CHRISTMAS PROMOTION
LTOptions at a 33% discount during the Year End Holidays.
Tell me More

Saturday, September 20, 2014

Weekend Portfolio Analysis (September 20, 2014)

Yesterday was September expiration. The two September positions expired worthless for max profit and the portfolio growth Year to Date is now +17.88%. That's a pretty decent return for 9 months. Don't be fooled by the way most sites report their returns. Also read my take on what realistic portfolio returns look like

SPX went from 1986.04 to 2010.40  this week for a 1.23% gain. The index is now up +8.7% year to date.

I didn't enter new trades and that makes it 32 days. New personal record. I feel relaxed and with plenty of energy to play offense now.
Market conditions
(Click on image to enlarge)
Stochastics: 82 (overbought)
McClellan: -91(neutral)
36% of stocks are trading above their 20 Day Moving Average (neutral)

Last week 40% of stocks were trading above the 20 DMA, yet the price of SPX was more than 1% lower. Now SPX is above 2000 and yet, a smaller number of stocks is trading above their 20 DMA. Interesting. Makes me think the market is not so strong right now. But I don't trade based on that circumstantial evidence. This is no man's land and period. No individual credit spreads until an extreme is reached.


October positions
RUT 1020/1030/1230/1240 Iron Condor: 91% probability of success with 27 days to expiration. RUT priced at 1146.92. This thing's starting to look more and more like a winner. No concerns at all.



Action plan for the week
It feels so nice to be 85% in cash and knowing that the portion you do have in play looks really strong. That's where I am right now, but this laziness will come to an end soon. It's time to play offense.

We may reach an oversold extreme in the next few days as measured by the 3 indicators I follow day after day. RUT is more oversold than SPX. If the markets hits a short term oversold extreme I will sell the November 970/980 RUT credit Put spread for at least 0.60 credit.

If the market doesn't reach a short term extreme, I will likely open a November Iron Condor on SPX. I'd like 1835/1840/2100/2105 if possible with a credit of 0.80. That's what I'd like. These numbers change from here to Friday. If I cannot sell the 2100/2105 Call side (safely above the projected trend-line), then I'll probably go with a RUT Iron Condor instead. I would like the Call side of that Iron Condor to be at least 1240/1250, but preferably 1250/1260. November is historically one of the strongest months of the year. Since 1950 there have been 42 positive Novembers and 22 negative ones. The average return is +1.35% which is calculated including the losing instances. Only December (49 times up vs 15 down and +1.62% average return) and April (43 up, 21 down, +1.38% avg. return) are historically stronger than November. So, time to be careful.


Forex
When it looked like LT Trend Sniper System would exit the short EURUSD position initiated on July 17, Wednesday happened and the EUR made a new 8 day closing low. For this reason the position is still in play. Ever since the trade was opened, the previous day closing price has never been an 8 day closing high. At the same time, no 8 consecutive days have gone by without the instrument making a new low. Those are the two exit conditions, and neither one has been met.

EURUSD is now trading at 1.28277, that is a 692 pip gain since the 1.3524 open. The stop loss had originally been placed 83.2 pips away risking 3% of the portfolio. That means the reward so far is 8.32 times the original risk specified for the trade. So, a portfolio growth of 24.96% by just following this monster down trend. This trade has been exceptional, the largest gain on a single trade ever (EURUSD data going back to January 1, 2000). The position will be closed only if EURUSD closes above 1.2958 any day this upcoming week. The robot is still in forward testing mode with paper money (21 months now) and hasn't been released to the public yet. Although there has never been any secrecy with the rules of the system and everybody is free to trade it manually


Economic Calendar
Monday: US Existing Home Sales. Chinese HSBC Manufacturing PMI.
Tuesday: German Manufacturing PMI
Wednesday: US New Home Sales
Thursday: Durable Good Orders
Friday: US GDP, Michigan Consumer Sentiment.

Good luck this week folks!

Check out 2014 Track Record


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

6 comments:

  1. Hi LT and Jonathan
    Thanks for the encouragement two weeks ago. I did enter a wide condor 10 days ago last Wednesday when the volatilities spiked (already I cannot remember exactly why the market was jittery - isn't that a sad state of American attention span)
    So things closed this week for a tidy 1.5% gain after commission.
    I am back in cash as well.
    Quick question - when you place an order to open a position how long do you wait to see if you will be filled? Do you guys change your price or wait all day until your order expires worthless? I think part of my slowness to open a new position is due to reluctance to pay a premium just because I cannot wait all day to see if my order fills.

    Happy Trading
    Dave

    ReplyDelete
    Replies
    1. Hi Dave,

      Nice gain. Regarding your question, sometimes I wait a few minutes to a few hours to get filled. It depends how badly I want that position. I will change my price if necessary to get into a position.

      Delete
    2. Hey Dave,

      I'm usually patient at order entry and most of the time I give my orders about an hour. Sometimes I have gone up to two hours.
      But, Like Jonathan said, sometimes I really want to enter a position badly, and will reduced credit just in order to get filled. Specially with Credit Spreads. With Iron Condors I'm usually way more patient.

      Cheers,
      LT

      Delete
  2. “The portfolio growth Year to Date is now +17.88%. That's a pretty decent return for 9 months.”

    Congratulations. You are beating the S&P 500 handily this year. It is proof that a conservative credit spreads strategy can outperform the S&P 500 and beat the crap out of most hedge fund managers in most years.

    “I didn't enter new trades and that makes it 32 days. New personal record. I feel relaxed and with plenty of energy to play offense now.”

    Based on my backtesting of SPX/RUT going back to 1990, it is rare to not make a trade for more than 45 days. Kudos to you for waiting until a high probability trade comes along. Most traders feel they always have to make a trade every week to be in the game.

    “RUT 1020/1030/1230/1240 Iron Condor: 91% probability of success with 27 days to expiration. RUT priced at 1146.92. This thing's starting to look more and more like a winner. No concerns at all.”

    I like your October RUT iron condor. I think it has a great chance of expiring for max profits. Next month I wish I am still in those 1230/1240 credit call spreads with you. I got out too early. Oh well.

    “It feels so nice to be 85% in cash and knowing that the portion you do have in play looks really strong. That's where I am right now, but this laziness will come to an end soon. It's time to play offense.”

    It sounds like you use 15% of your account size for each trade and keep 40% in cash at all times. Is this correct?

    “We may reach an oversold extreme in the next few days as measured by the 3 indicators I follow day after day. RUT is more oversold than SPX. If the markets hits a short term oversold extreme I will sell the November 970/980 RUT credit Put spread for at least 0.60 credit.”

    RUT was close to hitting my oversold indicator last week but it never got there. We might get more weakness next week. I want to add more contracts to my November RUT 1020/1010 on more weakness. RUT needs to drop another 20 points to 1125 before I consider it to be oversold.

    “If the market doesn't reach a short term extreme, I will likely open a November Iron Condor on SPX. I'd like 1835/1840/2100/2105 if possible with a credit of 0.80.”

    It is remarkable how much we think alike. I would like to sell a November SPX iron condor around that range next week too but I want to collect a 1.00 credit.

    “I would like the Call side of that Iron Condor to be at least 1240/1250, but preferably 1250/1260.”

    I was trying to get the November RUT 1260/1270 to fill for .50 last Friday but had no luck. I would be careful with the call side as well as this market appears strong still despite short-term weaknesses we seen all year.

    What I did last week:

    1. Closed the Oct SPX 1725/1720 credit put spread for .05 debit.
    2. Let the Sept IWM 103/101 and 98/96 credit put spreads expired for max profits.
    3. Sold Nov RUT 1020/1010 credit put spread for .65 credit
    4. Sold Nov IWM 102/100 credit put spread for .16 credit

    My current positions:

    Oct IWM 95/93 credit put spread
    Oct RUT 1030/1020 credit put spread
    Oct SPX 2075/2080 credit call spread (will adjust if SPX touches 2050 this month)
    Nov RUT 1020/1010 credit put spread
    Nov IWM 102/100 credit put spread

    You can follow me on Twitter @lienjonathan where I tweet my 90% probability credit spread trades in real-time for free.

    ReplyDelete
    Replies
    1. Thanks for your comments Jonathan and for sharing your positions as usual. I think they are all looking really well.

      As for my capital allocation yes, usually around 15% on a position. Now this doesn't mean I am willing to lose 15% of my portfolio in one play. I never let price penetrate my short strikes. I will adjust early and portfolio loses will be around just 2% - 3% of the portfolio (assuming the adjustment is successful). Those portfolio draw-downs to me are reasonable considering they represent one month or two months of trading.

      Regards,
      LT

      Delete
    2. Thanks LT. I normally risk 10% per position. I like your risk management plan.

      Delete