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BookingAlpha Option Trading Advisory

Sunday, August 16, 2015

Weekend Portfolio Analysis (August 16, 2015)

The last time I made a play this year was on July 27, exactly twenty days ago. Far from my personal record of thirty five but a clear proof that I am not willing to mortgage my derrière off in this market. My periods of extended inactivity in the past have always aligned with good performance. Naturally I've come to love them and to some extent I crave them, I pursue them.

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.

Market Conditions
(Click on image to enlarge)
Stochastics: 57 (neutral)
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.

August Positions
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 Positions
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.

Economic Calendar
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.

Check out 2015 Track record

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


  1. "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?"

    I think it is fine especially since it is going to be an unbalanced iron condor. When we are in no man's land and I sell a long-term iron condor, I am making a non-directional trade. The market can move higher, sideways, or lower and I can still make money. I am trading without concern over market direction except for a major market crash lower. I am not making any predictions about the market. I just want the market to stay between my short strikes.

    What I did last week:

    I did not make any trades in the Create Monthly Income Fund but I did sell some more RUT Oct 16th 1060/1050 cps when RUT became oversold on Wednesday.

    Plan for next week:

    I am thinking of selling RUT Dec iron condor. I am hoping to close some of my winning Sept credit put spread positions.

    Current positions:

    RUT September 30th 1000/990 cps - currently profitable; will close this month
    RUT September 30th 1050/1040 cps - currently profitable; will close this month
    RUT October 16th 1060/1050 cps - currently profitable
    SPX September 30th 1800/1790 cps - currently profitable; will close this month
    SPX October 30th 1750/1725 cps - currently profitable
    SPX October 30th 1800/1790 cps - currently profitable
    SPX November 30th 1750/1725 & 2275/2300 iron condor - currently profitable
    SPX December 31st 1750/1725 & 2275/2300 iron condor - 2275/2300 ccs position is showing a tiny loss

    1. Thanks Jonathan. I definitely feel more comfortable making it an unbalanced Iron Condor. Question, how much capital per trade (in percentage terms of your total) do you allocate as you usually seem to have 4, 5, 6 positions on.

    2. When the account was under $20K, I was using up to 20% of the capital for each trade. Now that it is over $20K, I use up to 10% of the capital.

  2. I personally think both options on SPX and RUT look good, specially the PS side. On the Call side not much out of the money for my conservative trading . Although my bias is more bear than bull, we as option spread sellers should not be obessed by bias but on extream sentiments.

    I added two new positions to my opend trades last week, all looking ok at more than 90% of probability to ending out of the money.

    RUT Aug15 CCS 1360/70 @ 0.52
    SPX Aug CPS 1815/25 @ 0.45
    SPX Sep CPS 1850/1860 @ 0.45
    RUT Sep CPS 1040/50 @ 0.6
    RUT Oct CPS 1060/50 @ 0.85
    SPX Oct CPS 1775/1785 @ 0.50

    1. Thanks Bellini. Yes, I think most traders have a tendency to feel bearish more often than bullish. This is perhaps influenced by all the negative news constantly being thrown around by the financial media, simply because that's the news that sells. There will always, always, always be negative news at any point during the year. Thanks for your opinion. Nice positions right there.

  3. By the way, I know the end of year feeling Henrick, as my November 14 activity resulted on a 20% account lost las year. So I'm trying to be very conservative and won't trade that much for November cycle.

    1. The good part is learning from the experience. What was done wrong? How can we do things a little better next time? In my case it was easy to identify the problem: I sold Calls to early without the markets being overbought because I fell in the trap of being too bearish as the world was coming to an end according to everybody. That was the first mistake, the second one was defending via adjustments those Calls, even though as the market rebounded it wasn't still overbought, yet I was opening new CCS positions. Those mistakes, can easily be avoided.

  4. Last Week:
    What a whippy market we had last week. On Monday, SPX was up +25 pnts (+1.2%). On Tuesday, it fell back -25 pnts (-1.2%). And finally on Wednesday, SPX was down -30 points (-1.4%) in the morning just to rally +30 pnts (+1.4%) in the afternoon.

    On Tuesday, I opened unbalanced iron condor spreads in October SPX. I was planning to open this iron condor on Monday, but when SPX gapped up on Monday morning and just kept rising (with IV and options prices falling I decided to wait). When SPX gapped down on Tuesday morning, I sold 7x SPX Oct 1850/1870 cps @1.30 and 5x SPX Oct 2200/2220 ccs @1.35. Total credit received $1585 (with margin $12415).

    On Wednesday, I adjusted the September RUT position. When RUT (briefly) fell under 1190, the delta of sold RUT Sep 1140 puts were over -26 and the position was down -8%. I bought to close all 6x RUT Sep 1120/1140 cps @3.88 (-$2328). Then I sold to open 9x RUT Sep 1060/1080 cps @1.51 (+$1359). Provided the RUT stays above 1170 (RUT Sep 1140/1170 dps expires worthless), this position will show a loss of -$260 at expiration (which is fine, because it is below my average winner).

    On Wednesday, I opened credit put spread in October RUT. When RUT made me roll the RUT Sep 1120/1140 cps by falling under 1190, I took advantage of this oversold condition and I sold to open 7x RUT Oct 1010/1030 cps @1.50. I received credit $1050 (with margin $12950).

    Open Positions:
    6x SPX Sep 1850/1870 cps + 5x SPX Sep 2210/2230 ccs
    9x RUT Sep 1060/1080 cps + 5x RUT Sep 1340/1360 ccs + 1x RUT Sep 1140/1170 dps
    7x SPX Oct 1850/1870 cps + 5x SPX Oct 2200/2220 ccs
    7x RUT Oct 1010/1030 cps

    Next week:
    The SPX September position shows nice profit of 10% (max. profit at expiration is 13%). I want to close this position to take the profit and to free up the margin blocked by this position.
    I will watch the other open positions. Rough adjustment points are (1160;1290) for the RUT September position, (2020;2130) for the SPX October position and (1150) for the RUT October position.

    Good trading,

    1. Absolutely, crazy market. And the funny thing is to see people's mood changing with every little market move. PPL have become extremely short term in their sentiment out there. Good positions right there. Your OCT SPX Iron Condor is better than what I will end up putting this week. Looks comfortable enough.

  5. LT:
    "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."

    "By the way, I know the end of year feeling Henrick,"

    I was there too last year. By September '14, I was up +8% thinking that I could make around +15% by the end of the year. Than came the V spike in October and November that killed my positions on the way down and up. I agree with both of you to trade more conservatively to protect profits.


    1. Absolutely, and like I already mentioned above, more than anything it will be about making the right adjustments. Not throwing good money after bad money. The breakout or sell off will come, eventually, so we have to be careful. I think with this little group we have formed, we will be much better informed than last year sharing feedback from like minded traders.