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Saturday, May 2, 2015

Weekend Portfolio Analysis (May 2, 2015)

Phewww, that was an exciting week with nice moves both ways on Thursday and Friday. I took it easy and didn't add new positions to the portfolio as not all the stars were aligned for me, a.k.a my system didn't trigger any trade signals. In the end we went from 2119.29 down to 2108.29 for a  0.52% decline. The index is now up 2.40% for the year.

There was a nice decline on Thursday, especially on the Russell index which some people took advantage of. I was asked by a couple of folks why I wasn't selling Puts that day. Well, basically the market was not at the oversold extreme I look for. If you sold Puts that day, things are working beautifully for you my friend. Congrats. Personally, I didn't want to sell Puts when my system was telling me that I should wait just a little longer and I-don't-regret-it. Some people would rather sell options than have sex and I understand. Selling options is fun, it is addictive, highly addictive (like this mundane blog), but a plan is a plan and I didn't want to be like a deer caught in the headlights later.

Market conditions
(Click on image to enlarge)
Stochastics: 44 (neutral)
McClellan: -85 (neutral)
Stocks above their 20 Day Moving Average: 39% (neutral)

I hate to sound like a broken record but we are still in no man's land and still in the long term trend channel. I will not sell any credit spread until the market reaches an extreme. The bid looks strong after Friday's solid bar, but that could just be my recency bias. I will avoid trading under circumstances like this one.

Here's the Russell index and my positions represented by the horizontal yellow lines. That's where I don't want the markets to go:

(Click on image to enlarge)
 Even though the strike prices are similar for the May and June positions, the probability models look completely different, which is good. In other words, because I don't make adjustments based on absolute numbers (distance between the index and my short options), but based on probabilities instead (30% prob. in the money), these two positions would never be in need for adjustment at the same time.

May positions
RUT 1100/1110/1330/1340 unbalanced Iron Condor
2 weeks to expiration, 95% probability of success. This is a winner. Will hold it until expiration.

June positions
RUT 1130/1140/1340/1350 unbalanced Iron Condor
7 weeks to expiration and 73% probability of success. It would be good for this one if the market went up a little, but, it's not too bad and I'm not too concerned at the moment.

Action plan for the week
Existing positions are looking good. The June Iron Condor may need an adjustment on the Put side if RUT breaks below 1200. If that happens, volatility would expand and I should be able to deploy a new spread in the 1070's area which would be a high probability trade.

As for new trades, if the market reaches an oversold extreme I will sell SPX Puts. If SPX hits 2050, I will sell Put spreads in the mid 1800's using June Options.

On the way up, if SPX reaches 2150 or so I would like to sell Calls above 2230, also using June options.

Economic Calendar
Sunday: HSBC Manufacturing PMI
Monday: Germany Manufacturing PMI
Tuesday: US ISM Non-manufacturing PMI
Wednesday: ADP Nonfarm employment change
Friday: Nonfarm Payrolls, Unemployment change

Trading is life.
Take it easy folks!

Check out 2015 Track record

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  1. I am one of the folks that sold credit put spreads on RUT last Thursday when my system told me we had an oversold signal. You are showing great discipline by not selling puts because your system told you it was not time yet.

    Account grew 1% for April. Account is up 10.5% YTD vs. 2.4% for the S&P 500.
    Here are my trades for last week:

    Trade 1 (Monday April 27th) - I sold August 21st IWM 105/103 & 138/140 iron condor for .31 credit
    Trade 2 (Thursday April 30th) – I sold July 17th RUT 1050/1040 credit put spread for .75 credit
    Trade 3 (Thursday April 30th) – I closed June 30th RUT 1380/1390 credit call spread for .10 debit. I got in this trade on 2/25/15 for .59 credit. Profit is .49.
    Trade 4 (Friday May 1st) – I closed August 21st IWM 138/140 credit call spread for .07 debit. I got in this trade on 4/27/15 for .18 credit. Profit is .11.

    Current Positions:

    RUT June 30th 1000/990 cps
    SPX June 30th 1750/1725 cps
    RUT July 17th 1050/1040 cps
    IWM August 21st 105/103 cps
    SPX August 31st 1750/1725 & 2275/2300 iron condor

    1. Hi Jonathan,

      I like your RUT July 17th 1050/1040 cps. Actually, I was looking at RUT July 1050 puts myself on Thursday. If I hadn't had the RUT June iron condor, I would have sold the RUT July 1050 puts, too.
      But the game is still on: if RUT falls to 1170 in the next couple of days and it makes me roll the RUT June 1100/1120 cps, I might sell RUT July cps at around 1000.


    2. Hi Martin,

      I will join you in selling July RUT 1000/990 cps in my personal account if we fall to 1170 next week.

  2. I still can't believe any of my orders were filled this week. I had orders on bots sides and SPX and RUT, perhaps I was being to greedy on the premium.

    Just got one position, and have been over 30 days I dont have a new positions,

    SPX May 1840/1850 CPS

    Jonathan you did quiet well this week, you have taken off the plate the opportunities the markets have presented us.

    LT, Hope your June position dont get thread, I honestly though your PS June leg was a bit not out of the money enough, but i'm just a humble newbe.

    Have a great week

    1. Thank you sir. I will sell July SPX 1800/1790 cps if SPX is below 2060 next week. If IWM bounce back to 126/127 area, I will look to iron condor my Aug IWM 105/103 cps with 138/140 ccs.

  3. Last week:
    I did not trade last week. I already have two open positions in the June expiration cycle and they did not get into trouble. I was just watching SPX and RUT going up and down.

    Open positions:
    4x IC SPX June 1910/1930/2210/2230
    4x IC RUT June 1100/1120/1340/1360

    Next week:
    I will continue monitoring both iron condors. My adjustment points are (2030;2150) for the SPX iron condor and (1190;1290) for the RUT iron condor.

  4. After a brutal 2013 + 2014 period, it looks like we will have it easier this year. Glad to be joined by some like-minded folks in this journey. Thank you all for leaving your comments and sharing your positions.

  5. Hi LT,

    Thanks for the link to the article about Bollinger Bands that you posted on twitter. It is an interesting read. I use Bollinger Bands in a very simple way. I didn't realize there are other ways of using Bollinger Bands in trading strategies.


    1. Yeah that was a good article. The Bollinger Bands is a pretty useful indicator I must say. I've been developing a system for trading Gold that is purely based on the BBands indicator. It trades against common wisdom: On a break out above the upper band it goes long, on a break below the lower band it goes short. 8% yearly return on a 15 year back test with very little variance and small draw-down. So, you see, same tool and so many different ways to use it effectively.