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Saturday, September 6, 2014

Weekend Portfolio Analysis (September 6, 2014)

It's been 18 days since I entered my last options trade. That's still far from my record of 28 days without entering new trades which was from April 26 to May 23 this year. I might very well break that inactivity record because if the market doesn't reach a short term extreme, either overbought or oversold, I won't enter new trades until around September 19 when I would enter a November Iron Condor.

I know my trading inactivity makes it less fun for readers and followers, but, it's what it is. I hate over-trading and over spending in commissions when I see no clear opportunities. Over time I have learned the hard way to appreciate importance of patience in traiding.

SPX went up 0.3% this week and it is now up +9.0% year to date. That's pretty decent for long term investors and index followers. The Dow is up 3.9% YTD and the Russell a discreet 0.9%.

Market conditions
(Click on image to enlarge)
Stochastics: 61 (neutral)
McClellan: +20 (neutral)
63% of stocks are trading above their 20 Day Moving Average (neutral)

Again, no man's land. I won't enter any new trades at this point and I'm happy riding what I already have on.


September Positions
RUT 980/990 Bull Put Spread. TOS says that this position now has a 100% probability of success. Well, it is true that it is 15% below current RUT price and that there are only two weeks left to expiration. But I tend to not believe 100% numbers in trading. The market corrected 20% in just one day on Black Monday, 1987. So, there you have it. Anything can happen. But in spite of that, this position looks very safe by now.

SPX 1815/1820/2065/2070 Iron Condor. 88% probability of success with 13 days to expiration. The Call side is safely above the upper end of the up trend channel.


October positions
RUT 1020/1030/1230/1240 Iron Condor RUT's trading at 1170. The position is now showing an 80% probability of success with 41 days to expiration and it is making money +4% or ($63 dollars on a $1668 margin). A lot of fight left here and the Call side is not totally safe, but I'm happy riding this baby for a while.


Action plan for the week
Nothing to do to September positions.

As for August, if RUT hits 1205 - 1210 my short Call (1230) will reach the 30% probability of being in the money. If that happens, I'll be closing the 1230/1240 spread for a manageable loss and will redeploy capital with the 1260/1270 bear Call spread. I think it is unlikely for RUT to hit 1205 this week. That's a 3% run up from current level and although anything is possible, I think it is unlikely in just a week.

As for new trades, only if we reach a short term extreme. A 3% move up or down would get me interested, but like I said, that is an unlikely number for just a week. So, I may not do anything at all in the end once again.


Forex
The LT Trend Sniper System is still be riding the short EUR/USD position initiated on July 17 after a new 70 day closing low was made. Ever since the trade was open, 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 1.2950, that is a 443 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 5.32  times the original risk specified for the trade. So, a portfolio growth of 15.97% by just following this one trend. After the huge down day the Euro had on Thursday, it is very unlikely to see an 8 day closing high. If the EA exists the trade, it will be due to the lack of progress condition after 8 days without making a new low. To sum up, I think this position won't be closed this week.


Economic Calendar
Apparently a quiet week ahead with few important releases.

Sunday: Chinese Trade Balance, Exports and Imports
Wednesday: Chinese CPI and PPI

Thursday: US Federal Budget balance
Friday: US Retails sales, Michigan Consumer Sentiment, Business Inventories.

Good luck this week folks!

Check out 2014 Track Record


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5 comments:

  1. “I might very well break that inactivity record because if the market doesn't reach a short term extreme, either overbought or oversold, I won't enter new trades until around September 19 when I would enter a November Iron Condor.”

    I am going to do the exact same thing by the 19th of September. I am still not sure if I will do an iron condor on RUT or SPX first.

    “Over time I have learned the hard way to appreciate importance of patience in traiding.”

    You misspelled trading. This is so important for new readers to understand. Patience and discipline are the golden rules for our credit spread trading strategy. This is not day trading. We only take high probability trades.

    “But I tend to not believe 100% numbers in trading. The market corrected 20% in just one day on Black Monday, 1987. So, there you have it. Anything can happen. But in spite of that, this position looks very safe by now.”

    Anything can happen in the stock market. I think this 5 year bull market is a bit long in the tooth. Starting November, I will try to close all my positions early instead of letting it expire.

    “As for August, if RUT hits 1205 - 1210 my short Call (1230) will reach the 30% probability of being in the money. If that happens, I'll be closing the 1230/1240 spread for a manageable loss and will redeploy capital with the 1260/1270 bear Call spread.”

    What do you mean ‘As for August’? I like your plan for the October RUT credit call spread. I don’t think we will hit 1200 next week since we have no major upcoming economic news. In the absence of any really bad news from abroad, we will probably continue to drift higher or meander around 2000.

    “As for new trades, only if we reach a short term extreme. A 3% move up or down would get me interested, but like I said, that is an unlikely number for just a week.”

    I am still waiting for the overbought condition on RUT. RUT needs to hit 1200 for me to consider it overbought but it is unlikely to do so next week.

    What I did last week:

    Nothing. And that is perfectly fine with me.

    My current positions:

    Sept IWM 103/101 credit put spread (going to let this expire on Sep 19th)
    Sept IWM 98/96 credit put spread (going to let this expire on Sep 19th)
    Oct IWM 95/93 credit put spread (waiting to iron condor with Oct IWM 125/127 credit call spread or higher if IWM hits 119 next week)
    Oct RUT 1030/1020 credit put spread (waiting to iron condor with Oct RUT 1260/1270 credit call spread if RUT hits 1200 next week)
    Oct SPX 1725/1720 credit put spread (got a GTC order to close for 0.05 debit)
    Oct SPX 2075/2080 credit call spread (will adjust if SPX touches 2050 this month)

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

    ReplyDelete
    Replies
    1. Man I swear I didn't use to proof read my posts with so much attention before you started to correct me. But in spite of my efforts after you started correcting me, it is still frustrating to make at least two errors on every post, diligently detected and announced by you to the world. I guess I give up.

      By "August" I meant, October. I made a mistake.

      Good positions man. Good luck.
      LT

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  2. Hi LT and Jonathan
    I'm still here, and appreciate your weekly reports. I learn a great deal just following your work and comparing where I would be in similar position. Doing nothing is the best outcome a theta trader could ask for.
    I have actually stayed out of any positions for the past three weeks. Getting the kids back into school, and increased traffic at work has made me extremely busy so I have not had the time I require to prepare for trading. This is a little disconcerting for me, because I seek a system I do not need to dedicate significant daily time to follow. But for the short term I feel better getting rest and having powder ready when I can be better prepared.
    Good luck to you both.
    Dave

    ReplyDelete
    Replies
    1. "Doing nothing is the best outcome a theta trader could ask for."

      The less we trade the better our results. If you trade credits spreads more than a few times a week, it probably means you are not taking high probability trades. Frequent trading is not the 'Lazy Trader' style we are advocating.

      "I have not had the time I require to prepare for trading."

      If you trade monthly spreads the way LT and I do it, it should not require more than a few minutes a day to check if you need to make a new trade or adjust your current positions. This type of trading does not require much time and is pretty boring most of the time. The tortoise always win the race.

      "But for the short term I feel better getting rest and having powder ready when I can be better prepared."

      Sometimes the best trades are the ones you don't take. There is no need to get into every trade or to always be in the market.

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

      Delete
    2. Thanks folks.
      Dave, take it easy man.
      It is true as Jonathan says that selling out of the money options on indexes is not time demanding. But I understand your lack of activity as I went through those periods myself in the past.

      It could be a bit of frustration because of recent drawdowns.
      It could also be because you are the type of person that likes to study the market and backtest your ideas. Now that would certainly take a lot of time which looks like you don't have.

      Anyways, take it easy man. The market will continue to exist and won't go anywhere. Get prepared, and come back to the game with more confidence.

      Cheers,
      LT

      Delete