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Saturday, December 13, 2014

Weekend Portfolio Analysis (December 13, 2014)

The SPX index went from 2074.84 down to 2002.33 this week for a 3.49% loss. The S&P is now up 8.2% for the year. The Dow Jones is up 4.4% and the Russell index is down 1.5% year to date.

Market conditions
(Click on image to enlarge)
Stochastics: 7.8 (oversold)
McClellan: -198 (oversold)
Percentage of stocks above their 20 DMA: 29.96% (oversold)

According to my rules this is a short term oversold market due for a rebound. Of course, nobody knows anything, and the market will do whatever the hell it wants to do. But the rules of my strategy indicate selling out of the money Puts right now, which is a nice thing to do with the VIX above 21. For example you can now sell the SPX January 1780/1775 Credit Put spread with a 90% probability of success. Good odds down there as that would imply a major correction in just a month, during a period that is traditionally strong. Taking into account that the market recently reached a high of 2079, a fall down to 1780 represents 300 points or close to 15%.

December positions
SPX 1750/1760/2110/2115 Iron Condor
$340 credit. 98% probability of success. Will expire this Friday for max profit.

SPX 2110/2120 Credit Call Spread
$100 credit. 98% probability of success. Will expire this Friday for max profit.

SPX 1910/1915 Credit Put Spread
$120 credit. 85% probability of success. With a good chance of expiring worthless on Friday. Might need to adjust it if SPX goes down to 1930 or so in the next few days.

January positions
SPX 1820/1825 Credit Put Spread
$120 credit. 85% probability of success with 34 days to expiration. I was a little early with this one, but don't feel bad at all. I think 1825 is a decently safe level at this time of the year.

Action plan for the week
December positions are looking good and it should be a peaceful expiration week for me. Unfortunately, I had a loss in the December cycle which will limit my returns. I'm talking about the 2070/2080 Credit Call spread on SPX which I had to adjust back on November 11. So, it won't be a spectacular December, but still in positive territory.

The SPX 1910/1915 Credit Put Spread which I opened on Friday might take some heat if the market keeps falling. But I feel that another 3%-4% fall this week is unlikely, we'll see. In all likelihood I'm done trading 2014 options and I will disclose my final performance for the year next Saturday.

As for January, if I have a chance to sell another Credit Put spread with 90% probability of success, and 0.30 credit in the low to mid SPX 1700's I will gladly do it. If the market falls 1% - 2% this week and the VIX expands a little bit more that will be perfectly possible.

As for Calls, I'm not interested in selling Calls at these levels. So, if the market goes sideways, or even up this week, I won't enter new trades.

Long Term Investing
This week I purchased 49 shares of Suncor Energy at $32.59 (Suncor is one of the Canadian energy titans whose 20 year performance was analyzed as part of the Invest and Retire before you die series.)

Here's the scary chart
(Click on image to enlarge)
I now own 126 shares of Suncor at an Average price of $36.39. My projected dividend income for 2015 is $1965.53 CAD plus $443.52 USD. I've now maxed out the contribution room on my TFSA account and won't be able to make new investments until 2015. That's it, $31332 dollars invested between October and December, my entire contribution room. I'm not entirely satisfied, but I don't feel like I did terrible either. I should have certainly invested in Enbridge during the October mini panic. I should have also avoided a non-dividend grower such as Crescent Point Energy, but nobody has a crystal ball.

I'm now in the process of opening a real money Forex account for automated trading with the LT Trend Sniper strategy, my system for catching long term trends on the EURUSD currency pair. The goal is to have it all set up by January 1st.

This will be my first activity in Forex after my 2011 fiasco which I described in the I have lost my ass article. My broker of choice will be OANDA Canada as Alpari-UK is not accepting Canadian Residents anymore.

I'm optimizing the strategy for other currency pairs as well, but for now, in 2015 I will only trade the EURUSD as it's the one I have been testing for two years.

Economic Calendar
Not much going on this week.
Monday: HSBC Chinese Manufacturing PMI
Tuesday: European Manufacturing and Services PMI. US Building Permits and Housing Starts.
Thursday: German Business Climate Index. US Services PMI, Philly Fed Manufacturing Index

Good luck this week folks!

Check out 2014 Track record

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  1. This comment has been removed by the author.

  2. Friday was a good day to sell some credit put spreads with the market down more than 3% and VIX spiking over 20. We both might be early but it does feel like the probabilities will be on our side since we sold far OTM put spreads. The market will really need to collapse for us to be threatened.

    Your December and January positions are looking quite good. Are you planning to sell any RUT Jan credit put spreads?

    What I did last week:

    1. Sold Feb SPX 1800/1795 credit put spread for .45 and .50 credit
    2. Sold Feb SPX 1850/1840 credit put spreads for .95 credit
    3. Sold Feb RUT 1000/900 credit put spread for .90 credit
    4. Sold Jan1 RUT 1100/1090 cps for .90 credit
    5. Closed Dec5 SPY 212/214 credit call spread for .06 debit (in hindsight, I should have let these expire at the end of the year)

    My current IWM positions:

    Dec5 105/103 credit put spreads
    Dec5 93/91 credit put spreads

    My current SPY positions:

    Dec5 190/188 credit put spreads

    My current RUT positions:

    Jan1 1100/1090 credit put spreads (taking a little heat this week due to the market downturn but no major worries at the moment)
    Jan 1050/1040 credit put spreads
    Jan 1250/1260 credit call spreads
    Feb 1000/990 credit put spreads

    My current SPX positions:

    Dec5 1900/1895 credit put spreads (going to see if I can let this expire worthless)
    Jan 1955/1950 credit put spreads (I will look to adjust this position next week)
    Jan 2150/2155 credit call spreads (looking very safe now)
    Feb 1850/1840 credit put spreads (taking some heat this week due to big drop in SPX)
    Feb 1800/1795 credit put spreads

    My plan for next week:

    Below are some actions that I plan for next week.

    1. Adjust the Jan SPX 1955/1950 credit put spreads
    2. Sell Jan 1850/1845 credit put spreads
    3. Sell the weekly SPX 1900/1895 credit put spreads if market continues to fall
    4. Sell Feb SPX 1750/1745 credit put spreads if market continues to fall
    5. Sell Feb RUT 1270/1280 credit call spreads if RUT goes up a bit (This seems early for credit call spreads but I need some hedges for February in case the market falls more next year)
    6. I might sell some credit call spreads to iron condor with my Dec5 credit put spreads.

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

    1. Hey man,
      Not really sure about selling RUT spreads. I might go with SPX at a lower level. RUT for whatever reason is not correcting so much and I'm afraid it could do it later. Generally I will simply try to sell the most oversold index.

      You've been quite active lately. Solid trading. I bet you've had a decent year
      Thanks for dropping by.