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Sunday, November 16, 2014

Weekend Portfolio Analysis (November 16, 2014)

Folks! I'm back. After two weekends without portfolio analysis. I have to say the trip to Florida was awesome. It gets harder and harder to come back up every time I go down there. Funny how I used to hate that weather during my days in Cuba and how much I love it and miss it now.

But this is not Henrik's trips around the world. This is not a blog to discuss how awesome tourism is. So, let's get back to business.

Market conditions
The SPX index went from 2038.20 to 2039.82 this week. I'm not even going to do the math to calculate the percentage.

(Click on image to enlarge)
Stochastics: 86 (overbought)
McClellan: +49 (neutral)
65% of stocks are trading above their 20 Day Moving Average (neutral)

I suck at predicting short term market tops. You suck at predicting short term market tops. We all suck at predicting market tops. But, that won't stop us from trying. The McClellan oscillator has been going down since the beginning of November while price has kept going up. That's an important bearish divergence to consider. Also, the current price of SPX is 3.2% above the 50 Day Moving Average. Looking back, this kind of distance is as far as it goes (around 3%) before it eventually corrects to an area that is closer to the moving average.

I think we go down before we go up again. Although fighting a bull market this late in the year is tough. Anyways, I won't open new trades for the time being.

November positions
RUT 970/980 Credit Put Spread
$120 credit. Will expire this Friday.

SPX 1685/1690 Credit Put Spread
$120 credit. Will expire this Friday.

December positions
SPX 1750/1760/2110/2115 Iron Condor
$340 credit. 79% probability of success. 32 days to expiration. No concerns until SPX hits 2085.

SPX 2110/2120 Credit Call Spread
$100 credit. 80% probability of success. 32 days to expiration.

Action plan for the week
There really is nothing for me to do this week. Unless the market moves up 2% in which case I would sell RUT December Calls above 1250 or hopefully 1260. But I don't think that will happen.

On the way down, existing positions are looking good, so no concerns.

November positions will expire on Friday morning to put an end to my worst month of the year.

Thank God I've also been investing/receiving dividends this year which has allowed me to grow my capital that way, or else this would have been a year to forget. Yes, even though my options trading activity has been profitable in both 2013 and 2014, I really hate the fact that I could have done much better holding the index without putting so much effort.

Why keep doing it then? Why keep selling Credit spreads and Iron Condors?

Generally speaking, I truly think, based on my own experience, that it is extremely difficult to outperform the market via options selling strategies in years of double digit growth in the SPX index. But, on average, the market doesn't grow double digits every year. The average is around 6% to 7%. So, my answer would be: I keep selling options because it gives me a chance to outperform the market and obtain positive returns during not so strong years, or even obtain gains in negative years for the market. Something which would be very challenging to do via passive investments.

Economic Calendar
Monday: Draghi speaks, NY Empire State manufacturing index, Industrial Production
Tuesday: German ZEW Economic Sentiment. US PPI
Wednesday: US Building Permits, Housing Starts, FOMC Minutes, Chinese manufacturing PMI
Thursday: US Core CPI, Existing homes sales, Philly Fed index
Friday: Draghi speaks

Take it easy guys!

Check out 2014 Track Record

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


  1. Welcome back Henrik! I miss your weekend analysis. All good thoughts on today’s post.

    What I did last week:

    I did not make any trades.

    What I plan to do next week:

    My current positions are all profitable and looking good at the moment. So I do not plan to make any adjustments unless we go sharply down or sharply up.

    1. Let my Nov IWM 97/95 credit put spread expire for max profits.
    2. Let my Nov IWM 100/98 debit put spread expire worthless.
    3. Open a new January RUT credit put spread position.

    My current positions:

    Nov IWM 97/95 credit put spread
    Nov IWM 100/98 debit put spread (This position was opened to protect the 97/95)

    Dec RUT 950/945 credit put spread

    Dec SPX 1900/1895 credit put spread
    Dec SPX 1915/1910 debit put spread (This position was opened to protect the 1900/1895)
    Dec SPX 2100/2105 credit call spread

    Dec5 IWM 93/91 credit put spread
    Dec5 IWM 105/103 credit put spread
    Dec5 IWM 125/127 credit call spread

    Dec5 SPY 190/188 credit put spread
    Dec5 SPY 212/214 credit call spread

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

    1. Thanks Jonathan
      I'm also glad to be back.
      You have quite a few positions there and they all look pretty healthy to me.
      Thanks for sharing!