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BookingAlpha Option Trading Advisory

Saturday, December 20, 2014

Weekend Portfolio Analysis (December 20, 2014)

Yesterday was December expiration, and with it my options trading activity in 2014 came to an end. The following December positions finally expired yesterday for max profit:

SPX 1750/1760/2110/2115 Iron Condor
SPX 2110/2120 Credit Call Spread
SPX 1910/1915 Credit Put Spread

December resulted in a +1.62% return for the model portfolio before commissions (+1.31% after commissions). The return from my options trading activity this year was +5.44% after trading costs.

It was a tough year for option premium sellers, and I feel like I almost had it. I really did, when back on October 1st I was up +17.88% and could have stopped right there, or simply traded much more conservatively. But I really wanted to push it, I wanted a +25% return for the year and thought it was possible. Funny how I consider my current self a better trader than I've ever been to this date and yet I feel like this right after posting my worst year ever (options trading related).

Time to move on, and if you had a bad year and you are still complaining, if you haven't gotten over it yet, just remember that this is only a first world problem. So, suck it up!

Market conditions
As it turns out, the short term oversold conditions mentioned last week and the expected rebound materialized. Every time this happens, I feel I could have played a small out of the money Lotto Call, something which I will start doing in 2015 from time to time.

(Click on image to enlarge)
Stochastics: 77 (neutral)
McClellan: +54 (neutral)
Percentage of stocks above their 20 DMA: 59% (neutral)

We're now in neutral territory. At this point I don't sell individual Credit Spreads on one side of the market as I feel there is still potential for strong moves in either direction. I will however consider Iron Condors. Something which I will talk about on the Action plan for the week segment.

January positions
SPX 1820/1825 Credit Put Spread
$120 credit. 94% probability of success with 27 days to expiration. No concerns at this point. This is the only position currently open. Trading stress levels back to zero.

Action plan for the week
I have no plan for the existing position in January. It's pretty safe and I won't need to do anything to it this week.

As for potential additional trades in January, I will consider selling and out of the money Credit Call spread if we reach an overbought extreme. If I get to sell the 2160/2165 Call spread for 0.50 credit or better, I'll do it without hesitation. The projected upper end of the uptrend channel points to around 2125 by January expiration, so 2160 in my eyes is safe. I will keep it small though, so that in case of an eventual adjustment I can double my position without taking an extraordinary risk. So, for the model portfolio that would be only selling 2 of the 2160/2165 January 2015 Credit Call spread to start. Then, an eventual adjustment would be played with 4 spreads.

On the other hand, the February expiration cycle will be 8 weeks away this Friday. For the SPX index, the strike price with the 10% probability of expiring in the money on the Put side is 1815 and on the Call side it is 2185. Those strike prices of course may change from today until Friday, which is when I intend to open my Iron Condor. But they look pretty attractive to me. The upper end of the uptrend channel points to around 2150 by February expiration, so I feel the 2185 strike is decently safe. Again, prices will move, and I will end up playing something slightly different, but right now it would be the 1815/1820/2185/2190 Iron Condor. The mid-price right now is 0.90, at which you obviously won't get filled, but .85 or .80 are fill-able according to my experience. I will try to get filled with the unbalanced version of the Iron Condor 4/4/2/2. That is 4 Put spreads and 2 Call spreads.

As I recently mentioned, I'm back to trading Forex with real money. The account is already set up and the first position will be short EURUSD on Sunday at 5pm Eastern time. I know everybody's saying that the Euro is too oversold, but the system says it is time to go short, and the system is God. I will follow every signal of the system, except when frogs become able to fly like hummingbirds. I hope you get the idea.

The results will be publicly disclosed here via an independent third party verifier where you can follow the progress of every trade. The trading platform (Metatrader 4) sends information to MyFxBook every five minutes about the progress of trades, portfolio statistics etc.

The results will also be automatically updated on the Forex section of the Results page of this site.

Economic Calendar
Not much going on this week. Remember that markets will be closed on Thursday.
Monday: US Home Sales.
Tuesday: Durable Goods, GDP, Michigan 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


  1. It is amazing how quickly we can get out of an oversold condition nowadays. I wish I had sold more credit put spreads last Monday and Tuesday. My oversold reading on SPX was 2017 and on RUT was 1141. Obviously SPX went down by another 40 points but RUT closed at 1139 on 12/16. SPX will be overbought if it gets to 2095 and RUT will be overbought at 1225.

    My current positions:

    IWM Dec5 105/103 cps
    IWM Dec5 93/91 cps

    SPY Dec5 190/188 cps

    RUT Jan1 1100/1090 cps
    Rut Jan1 1140/1130 cps
    RUT Jan 1050/1040 cps
    RUT Jan 1250/1260 ccs
    RUT Feb 1000/990 cps

    SPX Dec5 1900/1895 cps
    SPX Dec5 2125/2130 ccs
    SPX Jan1 2000/1995 cps
    SPX Feb 1850/1840 cps
    SPX Feb 1800/1795 cps
    SPX Feb 2175/2180 ccs

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

  2. In the past, people use to regret overselling but nowadays people have many options and since some markets will eventually grow as time passes, overselling at a given time seems a no point to worry off.