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Saturday, May 23, 2015

Weekend Portfolio Analysis (May 23, 2015)

A pretty boring week for me in the trading arena with the SPX opening the week at 2121.30 and closing it at 2126.06 for a 0.2% gain. Year to date the index is now up 3.26%.

The fact that the S&P closed the week barely unchanged is not the issue, after all it could have done it with huge swings both ways. The issue is that it oscillated between 2120 and 2134 all week. Unbelievable. But, as I have said before: "Embrace boredom". As an options seller, it is not so good to open trades when the markets are boring, right before the storm. You would rather open your positions in tumultuous times. But, once your positions have been established, boredom in the markets is the best thing that can happen to you, so you fully burn all that Theta while you sleep well at night and happily dream about little angels.

Market conditions

(Click on image to enlarge)
Stochastics: 83 (overbought)
McClellan: -28 (neutral)
Number of stocks above their 20 Day Moving Average: 53%

Price is far from the boundaries of the long term up trend channel. The VIX is sitting at just 12.13. Selling individual credit spreads right now does not offer a good risk/reward potential. For example the June 2185/2190 Credit Call spread has 10% probability of expiring in the money. 2185 might look far to you, but it is only about 3% away, plus, if you adjust your positions early, as I do, then you would be adjusting this one at around SPX 2160 - 2165. Is that reachable for this market? Hell yes. That's less than 2% above current price. It could even be reached in a single session, especially in a market with room to move. If you go beyond 2185/2190 the credits are just too small, and it just stops making sense. In the case of Credit Put spreads, the problem is that with a small market fall of barely 2% - 3%, you could quickly be threatened with a 30% probability of being in the money in your positions. (Wah-wah-wwaah!! selling options sucks!! you liar! you have gotten me into this stupid business of selling options where I don't get to have fun on a daily basis and brag about my victories in front of my friends).

June positions
RUT 1130/1140/1340/1350 unbalanced Iron Condor
4 weeks to expiration. 92.80% probability of success....sigh....a very desirable woman.

July positions
SPX 1935/1940/2220/2225 unbalanced Iron Condor
79% probability of success with 8 weeks to expiration. This was the position that I started on Tuesday, just 4 days ago. Lots of baby-sitting ahead, no dangers in the horizon for now.

Action plan for the week
I'm still in offensive mode and my candidates, should the market reach a short term extreme, are still June options. I'd go with SPX preferably. I would love to sell the June 2230/2235 for 0.50 credit or better, but for that I need the index to hit 2180 and that looks unlikely for just a week.

On the Put side, I would love to sell the June 1925/1920 Credit Put spread for 0.30 credit or better. For that I need SPX to go down to about 2060. That could happen in a week, but with the small ranges we are seeing, it also looks unlikely.

Like I said on Twitter the other day, the markets have a tendency to be slow during the summer. Trading volumes go down and prices tend to move a lot less compared to other seasons of the year. It's not the summer yet, but we're getting closer and closer. So, there is a good chance that I will continue making just one trade per cycle, quite possibly Iron Condors only. I'm really hoping I get opportunities to make 2 or 3 trades per cycle, like in the old days, but I won't force myself into bad trades.

The LT Trend Sniper suffered its first loss of the year. Betting on a break out to the upside it went long the Euro on Sunday. It was a pretty bad trade I have to say as the position never got to be in profit. It hit stop loss 48 hours after the entry.

The performance of the Sniper year to date is now +13.45%. There should be 2 or 3 more trades left in the year.

Economic Calendar
Tuesday: Core Durable Goods Orders, Consumer Confidence, New Home Sales
Wednesday: Pending Home Sales, Crude Oil Inventories
Thursday: GDP
Friday: China's Manufacturing and Non-Manufacturing PMI

Good luck this week my friends!

Check out 2015 Track record

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  1. It was an uneventful week for me last week. I didn't make any trades. Theta decay is working its magic on all my current positions.

    RUT July 17th 1050/1040 cps – currently profitable
    IWM August 21st 105/103 cps
    SPX August 31st 1750/1725 & 2275/2300 iron condor
    RUT September 30th 1000/990 & 1380/1390 iron condor
    SPX September 30th 1725/1700 & 2275/2300 iron condor

  2. Hello all

    Still nothing done on the Calls side

    Outstanding positions are:

    RUT June 19th 1050/1060 cps @ 0.35
    SPX July 17th 1850/1860 cps @ 0.70
    RUT July 17th 1010/20 cps @ 0.35

    Wish you all a good week!!

  3. Last week:
    On Monday, my RUT June 1100/1120/1340/1360 iron condors reached the profit target. I bought them back at 0.60. I originally sold four of these ICs at 2.70. The realized profit is +$840 (+12.1% on margin $6920).

    On Monday, I opened new position in RUT with July expiration. RUT opened at around 1245 (in the middle of a recent price range and between Bolinger Bands). RVX at around 16 (in the lower part of BB). There was 60 days to July expiration. RUT Jul 1330 had delta only 8 and the RUT Jul 1330/1350 ccs was trading too cheap for my taste. That's why I decided to sell RUT Jul 1320/1340 ccs that was trading at 1.70 (RUT Jul 1320 call had delta over 11). To compensate negative delta of the RUT Jul 1320/1340 ccs, I decided sell RUT Jul 1100/1120 cps for 1.42. In the end, I ended up with five ICs RUT July 1100/1120/1320/1340 that I sold for 3.12 ($1560 credit with $8440 margin).

    Open positions:
    4x IC SPX June 1910/1930/2210/2230
    5x IC SPX July 1880/1900/2225/2245
    5x IC RUT July 1100/1120/1320/1340

    Next week:
    I might close the SPX June iron condor spreads that are near my profit target. Apart from that, I will be watching my other two positions with rough adj. points (2010;2160) for the SPX July ICs, and (1190;1272) for the RUT July ICs.

    Good trading,

    1. Hi Martin,

      Why do you sell 20-wide strikes? When it reaches your adjustment points, what is your plan of action? Thanks for sharing.

  4. You guys, are a bunch of profitable traders.
    Be wise, and be well.
    Thx for sharing.