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BookingAlpha Option Trading Advisory

Saturday, February 21, 2015

Weekend Portfolio Analysis (February 21, 2015)

Well folks, the February 2015 monthly options expiration cycle is now in the books. It was a pretty quiet one for me with only one trade. The 1875/1880/2190/2195 SPX Iron Condor finally expired yielding max profit and the portfolio growth after commissions was +3.01%. Year to date the portfolio is now up +4.16%. It has been a passive year for me so far, averaging only one trade per month which is well below my usual average of three. But simply put, the market hasn't gone to extremes, which has prevented me from entering more individual credit spreads. Hopefully, with some extreme action in the near future I get better opportunities to add more positions. The key to me though is to not get frustrated or anything if I don't see clear opportunities. Trading cannot be forced. That's something I have learned the hard way over time when I have entered positions at less than ideal times just for the sake of taking in more credit and then I have regretted it. I have learned to be patient, as hard as it is sometimes, and overall I think that has been positive for my trading.

Market conditions
The markets went from 2096.47 to 2110.30 in a shortened trading week for a 0.66% gain.
(Click on image to enlarge)
Stochastics: 96 (overbought)
McClellan: +74 (neutral)
Stocks above their 20 Day Moving Average: 69% (neutral but very close to overbought)

We're obviously close to a short term overbought extreme but not quite there yet. The three indicators I like to follow are saying that there is still room for this thing to move up. The upside is limited though. Last week I mentioned that the markets were unlikely to move past 2120 during the trading week (from February 16 to February 21) and I was right about that. For me, the top this week is around 2135. I don't see SPX going above that level this week as it would be more than 4% above its own 50 Day Moving Average, which based on history is a rare event.

At this point, and with two positions already open, there is no urgency to add something new. I don't like individual Credit Put spreads now, and as for Credit Call spreads I will wait a little bit more.

March positions
SPX 1845/1850/2170/2175 unbalanced Iron Condor
27 days to expiration and 76.28% probability of success. The Call side is the most concerning piece, but the position is not looking bad.

April positions
SPX 1855/1860/2200/2205 unbalanced Iron Condor
This position was initiated two days ago. A young position, obviously far from being threatened. Nothing new to say here.

Action plan for the week
I'll adjust the March unbalanced Iron Condor if SPX hits 2140 or so. But like I said, I think that's very unlikely to happen in the upcoming week. If I have to adjust, I will still use March options and will deploy capital in the 2190's area. This is an unbalanced Iron Condor so the loss on the Call side would be small. I would play the adjustment with full position which would allow me to recover everything and come out with a winner.

If the market reaches and overbought extreme, I'd like to initiate a March RUT 1300/1310 Credit Call spread position for 1.00 credit or better.

If we stay sideways, or if we fall from current levels I will do nothing. That's unless we fall so hard that a short term oversold extreme is reached. It looks like a stretch but anything is possible. With a 4% market fall or so, I would sell the RUT March 1070/1060 Credit Put spread for 0.60 credit or better.

Economic Calendar
Monday: Existing Home Sales
Tuesday: German GDP, Europe CPI, US Consumer confidence, China's Manufacturing PMI
Wednesday: New Home Sales
Thursday: US Core CPI, Core Durable Goods orders.
Friday: US GDP, Pending Home Sales, Chicago PMI, Michigan Consumer Sentiment.

Good luck this week!

Check out 2015 Track record

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  1. Your first paragraph is very important for all newbies to credit spread to understand. It is about patiently waiting for the right time to sell credit spreads.

    I agreed that we are closer to overbought at this point. If we continue to go up next week, I will sell my first credit call spreads of the year.

    What I did last week:

    I did not make any trades.

    Plans for this week:

    1. Sell ccs if I get an overbought signal on SPX and/or RUT.
    2. Close the Mar 31st RUT 1000/990 cps for .10 debit

    Current Position:

    Mar 31st RUT 1000/990 cps

    You can follow me on Twitter @lienjonathan where I tweet my high probability credit spread trades in real-time for free. You can like my Facebook page and see all my open and closed trades and track record below.

    1. Nice returns so far Jonathan. You're off to a great start. Keep it up and thx for sharing.

  2. I agree with Jonathan today post is text book article on our sell premium strategy.
    Well done all with this premiums we are recieing this month. Mine are the first of the year, so up just 1.3%, lagging behind of you two after the expiry of my SPX 1840/50 Bull Spread.
    My aim for the week is to sell CS on both RUY and SPX st 10 deltas April expiry.

    1. Good luck with that pal and as usual, thanks for dropping by!