Last year my portfolio was up +17.88% by the end of September, easily on my way to glory in the middle of a cataclysmic year for options sellers of the world. Then a series of absurd plays followed which made me look like I was on my period. It's not going to happen this year. By the time the curtains close this upcoming Friday the portfolio will be up almost 20% for the year. Protecting the good work done so far will become top priority and I will be that much more selective with my plays the rest of the way. The market has been trading on a very tight range since early February and eventually an explosion to one side will take place. There will be some casualties. Let's not be one of them.
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McClellan: +52 (neutral)
Number of Stocks above their 20 Day Moving Average: 44% (neutral)
We are in no man's land and in the middle of the sideways channel in play since February. I will not sell Individual Credit Spreads under these circumstances neither should y....well, you do whatever you want. I just think it is not wise. Long term Iron Condors, yes, those are in play.
RUT 1350/1360 Credit Call Spread
Will expire for max profit on Friday morning.
SPX 1925/1930 Credit Put Spread
Will expire for max profit on Friday morning. Life is good.
September RUT 1120/1130/1330/1340 unbalanced Iron Condor
85% probability of success up from 79% last week. The Call side is out of the question now. That part will be a winner. The Put side is not out of the woods yet and it will need to be defended if RUT declines from its current value of 1212 to around 1180.
Action Plan for the week
The August cycle is over for me. Nothing to do to the existing two positions which should come to an end without problems.
As for the RUT 1120/1130/1330/1340 Iron Condor in September, I will adjust the Put side down to 1050/1040 if RUT declines to roughly 1180 this week. That would be a 2.5% fall from current price, which is quite possible for a week of market action. But who knows? We may in the end going up, against the opinion of the entire universe which seems to be bearish now. (Fear and Greed Index at 11 showing extreme fear)
As for new positions, by Friday we will be 8 weeks away from October expiration so it is time to start looking for candidates to start trading the new cycle. Right now, being in no man's land I would opt for an Iron Condor, and being so far from extreme optimism (overbought) I would be conservative with the Call side so I would play an unbalanced Iron Condor. My candidate right now is SPX 1880/1885/2190/2195. I have to admit I don't feel extremely excited about the Call side of this position, although that's just letting my bias get in the way. What do you guys think about this position idea?
The other candidate is RUT 1050/1060/1290/1300. As usual, these numbers are not final. Things will change, the markets will move from here until the time when I pull the trigger. We may also reach an extreme oversold condition quickly in which case, I would just start trading the cycle via an SPX Credit Put spread.
The typical third week of the month, with lots of Housing data.
Tuesday: Building Permits, Housing Starts
Wednesday: Core CPI
Thursday: Existing Home Sales, Philly Fed Index
Stay humble my friends.
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