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BookingAlpha Option Trading Advisory

Friday, August 21, 2015

Defending positions

Lots of blood on the Street today.

Ok, in order to not be extra annoying I'll be concise. Lately, it looks like I have become one of those daily bloggers who doesn't have a life outside of blogging. God save me.

I deployed new SPX Credit Put spread early in the day while SPX was still around 2020.
Sell 4 September SPX 1825 Put @7.40
Buy 4 September SPX 1820 Put @7.10
Credit: 0.30 ($120)
Days to expiration: 28

I closed the Put side of the October SPX 1890/1895/2195/220 Iron Condor:
Buy 4 October SPX 1895 Put @31.90
Sell 4 October SPX 1890 Put @30.80
Debit: 1.10 ($440)

Originally this Put spread was opened for $120 credit, so there is a $320 loss here (120 - 440).

Deployed a new October Credit Put spread on SPX
Sell 3 October SPX 1710 Put @9.10
Buy 3 October SPX 1700 Put @8.50
Credit: 0.60 ($180)
Days to expiration:56

Current positions in the Portfolio: 
October SPX 1700/1710/2195/2200 unbalanced Iron Condor
$280 credit here and 8 weeks to expiration. This position looks comfortable, unless we get a true crash. As for the Call side no concerns. Getting this position to return all of its $280 credit or as much as possible would really help compensate for today's $320 loss. This is the only position currently in the October cycle so, provided we don't get a crash, the final result would be an easily digestible loss. Very unlikely that I will need to adjust this position.

September RUT 1050/1060/1330/1340 unbalanced Iron Condor
$195 credit and 4 weeks to expiration. With RUT currently at 1156 it is not terribly bad. RUT was surprisingly stronger today, shedding only 1.34% of its value as the S&P lost 3.19%. RUT has to go down to around 1100 next week for me to think about adjusting here. And if that happens, I would close for a loss and would deploy new spread in the 925 area, still with September options.

September SPX 1820/1825 Credit Put spread
$120 credit also 4 weeks to expiration. With SPX at 1970 this one is not terrible either, but things can get ugly next week who knows. With SPX falling to 1910 next week I may need to defend here and I should be able to go down to 1650 for the new positions, still using September options.

Ok, if RUT doesn't fall to 1100 next week (5% loss) and if SPX doesn't fall to 1910 (3%) I'm still fine holding these positions as they are. Then, for the week after that, the adjustment points would be even lower, which gives my positions more room.

If these September positions end up as winners just as they are, it's a total $315 credit (120 + 195), which totally eclipses yesterday's loss of $272 in the Sept cycle. This means there is still a chance of having a positive September cycle after all. If, on the other hand, the market keeps falling precipitously forcing me to adjust September positions, then there will be no way to have a positive September. If I need to adjust only one of the September positions once again, September will be about a negative -2.5% in the end. If both positions need to be adjusted, then September will end up about negative 5% to 6%. If these positions are adjusted they would go to extreme levels that I don't expect to have to defend again (SPX 1650 and RUT 925)

The technical picture
Plenty of technical damage was done today on the SPX.
The long term uptrend channel going back to 2011 was violated to the downside.
Also horizontal support at 2040 of course, and also horizontal support lower down at 1980.

The next one is a scarier 1820, or some crazy Fibo in the middle or other Vodoo magic.

(Click on image to enlarge)
Of course I expect more downside after today's bar. But, we are short term oversold now. I truly think we won't go below 1900, but who knows. I do expect a negative Monday. Another giant bar closing near the lows would tell me that more downside is yet to come. A negative Monday where we see an afternoon rebound so that we close far from the low of the day would be much more optimistic. But, as usual, my bias will make no influence in my decisions, I will trade the numbers like a robot in the end.

And here's RUT
(Click on image to enlarge) 
Also long term support broken in that uptrend channel. Now the focus is on horizontal levels. First, minor support around 1135, then a more important 1080 and finally a super important 1040. After that all hell breaks loose.

On a positive note, today I saw both the August RUT 1350/1360 Credit Call Spread and August SPX 1925/1930 Credit Put Spread expire for max profit. The return of the portfolio up to August expiration is now +19.28%. Pretty nice considering the SPX index is down 4.27% for the year. I'm optimistic and think I can stomach a little draw-down here without losing my sexual stamina.

Phew...! well, I guess I will have nothing new to say for the Weekend Portfolio Analysis tomorrow. So, I'll take a break over the weekend and will go back to being a normal, non-blogging, person.

Thanks for dropping by!
Take it easy, but always, always, always take it anyways.


Check out 2015 Track Record

Related Articles:
Adjusted SPX 1700/1710/2195/2200 Iron Condors expires succesfully

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  1. Very good post. Everyone can open positions, but defending them its a different story. As the candles didnt show any rebound at closed I'm expecting more bearish movement Monday, ideally turning to the green side late that day. I'm in very challenging territory as clearly I sis not defend my positions last Oct/Nov 2014 V movement, on my first year trying to emulate you all.

    I'm prepare to take losses on Sep15 RUT 1040/50 and adjust opening new Sep at 925 area, and doing the same with 1050/60 Oct15 opening Oct15 at 900 zone. Also on the SPX I might have to defend 1860/1850 and open Sep 1700.

    I will be proud of my losses if I do it according to plan.

    My positions are as follows

    RUT Sep15 PS 1040 1050 @ 0.6
    SPX Sep15 PS 1850 1860 @ 0.45
    RUT Sep15 PS 1790 1800 @ 0.48
    RUT Sep15 PS 990 1000 @ 0.65
    RUT Oct15 PS1050 1060 @ 0.85
    SPX Oct15 PS 1775 1785 @ 0.5
    RUT Dec15 PS 930 940 @ 0.8

    1. Thanks for the update BM. I like your disciplined approach and plan of action if market falls more.

  2. I like your new positions LT. You should be fine. Last Friday was quite busy for me. I made 4 trades.

    1. I closed SPX Nov 30th 2275/2300 ccs for $0.25 debit. This ccs was opend on 7/15/15 for $1.95 credit.
    2. I bought RUT Sept 30th 1070/1060 debit put spread for $1.52 debit to hedge RUT Oct 16th 1060/1050 cps
    3. I bought SPX Sept 30th 1850/1840 debit put spread for $1.50 debit to hedge SPX Oct 30th 1800/1790 cps
    4. I sold SPX Dec 31st 1600/1575 cps for $1.75 credit to finance the purchase of SPX debit put spread

    Current positions:

    RUT September 30th 1000/990 cps
    RUT September 30th 1050/1040 cps
    RUT October 16th 1060/1050 cps
    RUT September 30th 1070/1060 debit put spread
    SPX September 30th 1800/1790 cps
    SPX September 30th 1850/1840 debit put spread
    SPX October 30th 1750/1725 cps
    SPX October 30th 1800/1790 cps
    SPX November 30th 1750/1725
    SPX December 31st 1750/1725 & 2275/2300 iron condor
    SPX December 31st 1600/1575 cps

    What a fun trading week, we had last week. I was expecting some sort of a pullback. But I did not know we would be down -40 pnts in SPX on Thursday and another -60 pnts in SPX on Friday.

    On Wednesday, I partially closed SPX september ccs. I bought back two SPX Sep 2210/2230 ccs at 0.10.

    On Friday, I did a couple of adjustment trades:
    (1) As the delta of short SPX Sep 1870 puts reached -22 and the whole position was down around -4%, I rolled all six SPX Sep 1850/1870 cps down to 1740/1760.

    (2) With RUT falling, the RUT Sep position showed open loss of -10% and the delta of short RUT Sep 1080 puts was around -17. I bought one additional RUT Sep 1080/1110 debit put spread for 5.25 to reduce the position delta.

    (3) Delta of short SPX Oct 1870 puts were -25 and the position was down -8%. I rolled all seven SPX Oct 1850/1870 cps down to 1690/1710.

    6x SPX Sep 1740/1760 cps + 3x SPX Sep 2210/2230 ccs
    9x RUT Sep 1060/1080 cps + 5x RUT Sep 1340/1360 ccs + 1x RUT Sep 1140/1170 dps + 1x RUT Sep 1080/1110 dps
    7x SPX Oct 1690/1710 cps + 5x SPX Oct 2200/2220 ccs
    7x RUT Oct 1010/1030 cps

    I am planning to watch the open positions and adjust them again if necessary.
    (1) SPX September position: With SPX around 1920, I will buy a debit put spread to cut the position delta.

    (2) RUT September position: With RUT below 1150, I will close the debit put spreads and will roll all RUT Sep 1060/1080 cps down to RUT Sep 9090/1010 cps. This position is pretty close to my max. loss (-$1500). If the max loss is hit, I will close the entire position and will move the money into October credit put spreads.

    (3) SPX October position: With SPX around 1930, I Will buy a debit put spread to reduce futher losses.

    (4) RUT October position: With RUT around 1130, I will roll all RUT Oct 1010/1030 cps down to roughly RUT Oct 940/960 cps (and slightly increase the size).

    Good trading,

    1. Hi Martin,

      Thanks for the update. How do you determine which debit put spreads to buy?