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Saturday, October 25, 2014

Weekend Portfolio Analysis (October 25, 2014)

We had an exceptionally strong week in the markets with SPX going from 1885.62 to 1964.58 for a +4.2% gain. I don't know how this week ranks in the entire history of the markets, but it is the strongest week I've ever reflected in my three years doing the Weekend Portfolio Analysis.

I made two trades in my options trading portfolio. First, on Tuesday I closed the RUT November 910/920 Credit Put spread for a profit. This trade was originated as an adjustment to an October Iron Condor. Closing the spread allowed me to remove downside exposure in the portfolio and it also turned the whole October Iron Condor into a profitable play, adjustment costs included. Then on Friday I entered an SPX December 1750/1760/2070/2080 Iron Condor in what should be a comfortable position for at least a couple of weeks.

Market conditions
(Click on image to enlarge)
Stochastics: 91 (overbought)
McClellan: +217 (overbought)
68% of stocks are trading above their 20 Day Moving Average (neutral)

We're very close to a short term overbought extreme. I think, from here, if we go up, it will be in slower motion. A 2% - 3% move up this week is unlikely. Of course long term, we're not so overbought when only 42% of stocks are trading above their 200 Day Moving Average. But my concern is really the short term. I see the upside limited and think it is time for some sort of consolidation. Certainly not another +4% week.


November positions
November RUT 970/980 Credit Put Spread
$120 credit. 98% probability of success and 26 days to expiration. No immediate threats on the horizon.

November RUT 1150/1160 Credit Call spread
$200 credit. 26 days to expiration. I was close to adjusting this spread but the 30% probability was never reached. I may need to make an adjustment this week if RUT hits 1124 - 1125.

November SPX 1685/1690 Credit Put Spread
$120 credit. 99% probability of success, 26 days to expiration. No immediate threats this week. I tried to close it for 0.05 debit but didn't get filled, and I for sure am not willing to pay 0.10 debit to close it. So if I don't get filled at 0.05 it will stay there until it expires.


December positions
December SPX 1750/1760/2070/2080 Iron Condor
$340 credit. 76% probability of success. 54 days to expiration. The trade entered yesterday, nothing new to say here.


Action plan for the week
I have 3 Credit Put spreads and 2 Credit Call spreads on at the moment. That's enough exposure for me so, I'm unlikely to enter new positions at this point. My focus this week will be to defend the November RUT 1150/1160 Credit Call spread. If it reaches the 30% probability of being in the money, I will adjust it up to 1180/1190 or something like that. If the market keeps rallying after my adjustment, I may be interested in selling November SPX Calls around 2040 - 2045.


Long term Investing
I kept adding to my long term investments positions. On Monday, I purchased 8 shares of Chevron at $111.11 USD. The cool thing about this purchase is that most of the capital used was not money I had to work for, but capital supplied by accumulated dividends coming from the portfolio itself. Lovely. Now I have more shares on a solid dividend payer and grower that will produce even more passive income going forward. I decided to go with Chevron as it had recently experienced a severe 20% correction. The stock was well below its 200 DMA and near previous support. I timed the purchase pretty well.

That same day I bought 22 shares of Bank of Nova Scotia at $67.23 CAD. This is my third purchase of BNS stock and my total position is now 67 shares.I think this has a good chance to be a solid investment 20 years down the road. I recently wrote a piece about this company as part of the Invest and retire before you die series where I will profile Canadian blue chip companies that pay and grow dividends and could be solid components of a long term investment portfolio.

With these purchases my projected yearly dividend income is now $1857.79 Canadian Dollars plus $443.53 American ones.


Economic Calendar
Monday: German Business Climate Index. US Pending Home Sales.
Tuesday: US Durable Goods, Consumer Confidence.

Thursday: German Unemployment. US GDP.
Friday: European CPI and Unemployment. US Chicago PMI and Michigan Consumer sentiment.

Good luck this week folks!

Check out 2014 Track Record



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1 comment:

  1. I heard SPX had its best week in nearly 2 years. I think we are also close to a short-term overbought extreme too. I like your plan to adjust the November RUT 1150/1160 cps. I also like your plan to sell a November ccs if SPX rallies again next week.

    What I did last week:

    Last week, I entered my only short position in my portfolio.

    1. I sold a Nov SPX 2025/2030 credit call spread for .40 credit last Wednesday.

    What I plan to do next week:

    I plan to enter more short positions next week if we continue to go higher.

    1. I will sell Nov IWM 119/121 credit call spread if IWM climbs to 112 to 113 area.
    2. I will sell Dec SPX credit call spread if SPX touches 1975.
    3. I will sell Dec SPY credit call spread if SPY touches 197.5.
    4. I will sell Dec RUT credit call spread if RUT touches 1125.

    My current positions:

    Nov IWM 97/95 credit put spread
    Nov IWM 100/98 debit put spread
    Nov IWM 116/118 debit call spread
    Nov SPX 2025/2030 credit call spread

    Dec RUT 950/945 credit put spread
    Dec SPY 167/165 credit put spread
    Dec SPX 1730/1725 credit put spread

    Dec5 IWM 93/91 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