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Saturday, May 9, 2015

Weekend Portfolio Analysis (May 9, 2015)

Oh là là! That's a phrase French speaking people use to express surprise, among other things. Learn how to pronounce it via Youtube. I say Oh là là to this market! Markets are always hard to trade, markets are always in Oh là là mode. How many of you (us?) were expecting a rebound on Thursday and Friday? It's always the same. It's always the same and it will continue to be like that. The fear of the next major market crash is always looming and the inevitable "Recency Bias" impregnated in the herd mentality, the tendency that people have to believe that what has been recently happening will continue to happen. You know like when Gurus on CNBC ALWAYS say "I think there is more to come" both during rallies and market sell offs. That's recency bias.

Fortunately, I'm not in the business of predicting where the markets will go, but where the markets are not likely to go. They sound similar, but think about it. They are totally different animals. I can accommodate my predictions however I want, for example, I make the bold, historic prediction right now on May 9, 2015 that the S&P500 will not hit 50,000 next month and I am 10000% sure I will be right. I'm willing to bet my girlfriend on that prediction (I'm actually willing to bet my girlfriend on many other things but you get the point). Of course, I will get no money for playing such a prediction in the Options markets because no lunatic would ever take the other side of that bet and that's why we've got to get closer to the danger in order to make it all worth it.

In any case, whether you believe the markets are predictable or random, whether you are affected by recency bias or not, the fact is that the Russell Index rebounded right on the lower end of the uptrend channel. Right there, like magic, by the books, and I swear I haven't re-drawn my lines. These are the same lines I have been displaying for a few weeks now. Was it luck? Maybe. I prefer to think that I've become good at identifying trend channels. Let me live my dream.

(Click on image to enlarge)
Stochastics: 31 (neutral)
McClellan: -32 (neutral)
Stocks above their 20 Day Moving Average: 41% (neutral)

Do not sell Calls right now. Do not sell Puts either. The VIX is below 13. This is the perfect moment to keep doing nothing.

May positions
RUT 1100/1110/1330/1340 unbalanced Iron Condor
1 week to expiration, 99% probability of success. Will expire for max profit this week. This is the only position in May. It won't be a spectacular month, I haven't had that this year. Just another +2% month. I'll take it.

June positions
RUT 1130/1140/1340/1350 unbalanced Iron Condor
6 weeks to expiration and 82% probability of success, up from 73% last week. This is starting to look good now. It should give me no problem in the days ahead.

Action plan for the week
In the end I didn't have to defend my positions as I had planned in the Getting ready to defend. No reason to panic article that I wrote after market close on Wednesday. Things are looking good now for both my positions. They should give me no trouble this week and May's monthly expiration options will be in the books by the end of the week. It will be another discreet cycle but little by little we climb the mountain. The portfolio growth will go up to +11.63%. That's after fees and still with 7 more months ahead.

As for new positions, same as last week. I don't want to enter anything else on Russell. I don't like the idea of having 3 different Put spreads on there, nor Call spreads. Enough with the exposure in RUT. So, my focus for new trades is SPX. Unfortunately, during this week's sell off, SPX never hit an oversold condition. Nothing changes, same plan as last week. So, let me quote:

"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."

Long term Investing
I recently sold my shares of WSP Global, which I had purchased back in September last year. I bought at $34.56 and sold at $42.84, for an almost 24% return. In addition to capital appreciation I received 3 dividend payments during the time I held it, which elevated the total return to 27.2%. The reason for selling was that WSP does not totally align with my long term investing philosophy of dividend growing companies with a solid history of increasing dividends year after year, with manageable payout ratios and low debt. This was more of a speculative play.

I also bought 25 shares of TransCanada this week at $53.67. Still on the pricey side, but not as terrible as it had been for so long.

My TFSA is the only investing account I have left in Canada, which I don't lose after my move to the US. I cannot make any more contributions to this account but I can trade inside it, receive dividends, sell covered Calls. Just no fresh capital additions. I have just about 37 grand there and little by little I will try to move towards a less speculative and more solid portfolio. My goal is to include the 9 companies I profiled in A basic Dividend Growth oriented Canadian Investment Portfolio. In addition to those 9, I would also like to add Canadian National Railway which I believe is another solid core Canadian holding.

Of course patience is the name of the game because everything is so expensive right now. I also want to get rid of Black Diamond, Crescent Point Energy and finally reduce my position size in Suncor Energy. Then it will be my sleep well portfolio and we'll see what happens 20 years later.

Economic Calendar
Wednesday: China's Industrial Production, Europe's GDP, US Retails and Core Retail Sales.
Thursday: US PPI, Initial Jobless Claims

There are days when I love trading. There are some other days when I love it even more.
Stick with the Lazy one!
Talk to you soon.

Check out 2015 Track record  

Go to the bottom of this page in order to see the Legal Stuff


  1. "The portfolio growth will go up to +11.63%. That's after fees and still with 7 more months ahead."

    Congratulations on your trading success this year. This is a great return.

    I did not make any trades last week. I was close to selling July 31st SPX 1800/1790 cps if we had gone below 2060, but it never happened.

    Here are the current positions:

    RUT June 30th 1000/990 cps - I hope to close this position next week for .10 debit
    SPX June 30th 1750/1725 cps - I hope to close this position next week for .30 debit
    RUT July 17th 1050/1040 cps – currently profitable
    IWM August 21st 105/103 cps – currently showing a small loss
    SPX August 31st 1750/1725 & 2275/2300 iron condor – currently profitable

  2. After the end of the May clycl my portfolio will be 6.33% gross, still lagging behind but I am not doing nothing to regreat and that is one of my goals for this season (other goal is to get LT to follow me on twitter :)

    I have been active on this week opening positions both june and July

    Here are my current positions:

    SPX May 15th 1840/1850 cps @ 0.70
    RUT June 19th 1050/1060 cps @ 0.35
    SPX July 17th 1850/1860 cps @ 0.70
    RUT July 17th 1010/20 cps @ 0.35

    Target for this week to creat an IC trading some Credit Spreats to add at current PS

    1. Holly crap! I thought I was following you on Twitter already !!
      Done ! Following now!

      Thanks for sharing your positions.
      And that's good. Do not force anything. Forget about the performance number and trade every position as if nothing has happened. Cold mind.


  3. Great articles, this week, LT! I really liked the "Getting ready to Defend" post!.

    I had a good week trading and my account is up 13.96% YTD. Below are my open positions:

    SPX Aug5 2275/2300/1725/1700 iron condor @ 3.40
    RUT Jul 1050/1040 cps @ 0.75
    TLT Jun 131/133/117/115 iron condor @ 0.45
    TLT Jun 122/129/122/155 iron butterfly @ 4.20
    /CL Jul 75 call @ 0.10
    /CL Jul 80/46 strangle @ 0.21

    Keep up the great trading, everyone!

    1. Hi Aram,

      I am wondering about the strikes of your TLT butterfly (TLT Jun 122/129/122/155). When you open a butterfly, you sell one put/call at the money and buy one put/call out of the money. Given that you sold 7-wide 122/129 call spread, didn't you actually sell 122/115 put spread (instead of 122/155 as you wrote)? Thanks for clarification. I am just curious.

      I like that you diversify by using various strategies in different products and expiration months. Good trading.


  4. Last week:
    I did not trade last week. Open positions did not get into trouble and the market did not get extended enough to create new positions.

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

    Next week:
    With 67 days left till July expiration on Monday, I am planning to sell SPX icor condor spreads in July exp. cycle next week. And I will adjust my open positions if necessary: adjustment points are (2030;2160) for the SPX June iron condor and (1190;1300) for the RUT June iron condor.


    1. Thanks Martin. What are you planning to sell on Monday?

    2. Given the Friday close, I am thinking about SPX July 1880/1900/2225/2245. I normally sell credit spreads with 56-60 days to expiration. But I find these iron condor s to be too narrow. By opening the iron condors one week earlier, I can sell credit spreads further from the current price of SPX for the same amount of credit. Obviously, I will have to stay in this position longer in order to hit my profit target.

      I know that you sell credit spreads with over 100 days from expiration (but I am not there yet :o)