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Sunday, August 9, 2015

Weekend Portfolio Analysis (August 9, 2015)

Doing nothing sometimes is really fun. Seriously. I love seeing the markets move in one direction, people and gurus going crazy with their recency bias while the conservative and lazy options seller waits it all out with solid positions that only need protection during extreme moves. Doing nothing is fun because it means you are "making it". It means you are doing good. It means you are trading well. You don't need to be constantly trading in order to feel that you are doing "all the effort in your hands" to grow your money. A couple positions at a time can bring some serious dough in the long run and the best part is, it can make it all low stress, not to mention "commissions effective".

As the market went from 2104.49 down to 2077.57 (-1.28%) the world became that more bearish and pessimistic. But fear not. Despite all the doom and gloom I believe we won't see a huge correction or anything like that in 2015. Give this markets some credit: European debt issues, Greece, China's debacle, Commodities crash, ISIS, end of QE, possible interest rate hike, and,...and,...let me say this, the markets are still up 0.91% year to date. Sure, it is not 2013, but this market has shown some serious resilience to go down with all that has been thrown at it. As the US Economy keeps marching well, with more jobs being created with consistency, I favor the notion that there will be no cataclysm in the home of the brave. And as for the interest rate thingy, if it happens, isn't it a recognition that things are better? I don't know. This joke of an industry is full of contradictions as every single piece of news can be used to defend both the bullish case and the bearish one.

So, that's today's talk about market fundamentals. Which I never analyze as I think they are irrelevant to the type of trading that we do but some people have asked about my view. So, I thought I would reflect my opinion, as useless as that may be, and in the process make this article that much more entertaining. Now, let's get down to it shall we?

Market Conditions
(Click on image to enlarge)
Stochastics: 41 (neutral)
McClellan: -32 (neutral)
Number of Stocks above their 20 Day Moving Average: 34% (neutral)

No man's land but close to a short term pessimistic extreme. Not my ideal time for new entries, but with a small 1.5% decline it will be show time. The 2040's in the SPX is a very interesting battle zone. The market will be in a short term oversold condition down there and it will be ideal for out of the Money Put selling. Using September options, it will be possible to sell Put spreads around the 1875 area for 0.30 credit or better. As usual, you will be afraid as the whole world will seem to be coming to an end and the terrible feeling that the likes of Justin Bieber and Miley Cyrus won't be there to save us will be on the prowl.

August Positions

RUT 1350/1360 Credit Call Spread
This fight is over and it has been won. I'll just ride this one all the way to expiration.

SPX 1925/1930 Credit Put Spread
99% probability of success with 2 weeks left. The perfect girlfriend. The one that never cheats on you.

September Positions

September RUT 1120/1130/1330/1340 unbalanced Iron Condor
79% probability of success, down from 84% last week. Still plenty of time for the market to inflict some pain with 6 weeks to expiration. I may need to defend the Put side if RUT falls down to the 1180 area (RUT is currently trading at 1206 so 1180 is now easily within reach)

Action Plan for the week
August positions look great, nothing to do there.

My September RUT position will need adjustments on the Put side in the event that RUT reaches 1180 or so. If that happens this week, I will close the 1120/1130 Put spread for a loss and will deploy new capital in the 1050 zone. The Iron Condor will be 1040/1050/1330/1340 after the adjustment and that should be the end of the story.

If the down move is "organized" (politely inside the downtrend channel) then 1180 will not be reached this week. I have to be alert nonetheless.
(Click on image to enlarge)
As for new positions, with SPX revisiting support around 2040, I will greedily sell September Put options in the 1875 neighborhood, where I think we have great odds in barely more than 5 weeks.

Economic Calendar
Tuesday: German ZEW Economic Sentiment
Wednesday: China's Industrial Production, US Crude Oil Inventories
Thursday: US Retail and Core Retail Sales
Friday: Europe's CPI and GDP. US CPI and Michigan Consumer Sentiment

Good luck this week my friends! Thanks for dropping by!

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  1. I noticed your posts are more entertaining now than when you first started back in 2012. I agreed with your assessment of the market. We are close to an oversold condition on RUT and SPX. If we go down again next week, it will be a good opportunity to sell some credit put spreads. RUT will be oversold if it goes below 1195. SPX will be oversold if it is below 2050. Both are possibilities for next week if we see more selling.

    What I did last week:

    1. Last Monday I sold SPX Dec 31st 1750/1725 & 2275/2300 iron condor for $3.55 credit.
    2. Last Tuesday I closed SPX Oct 30th 2275/2300 ccs for $0.25 debit.

    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
    SPX September 30th 1800/1790 cps - currently profitable; will close this month
    SPX October 30th 1750/1725 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

  2. Last Week:
    I did not trade last week. No new trades. No adjustments.

    Open Positions:
    6x SPX Sep 1850/1870 cps + 5x SPX Sep 2210/2230 ccs
    6x RUT Sep 1120/1140 cps + 5x RUT Sep 1340/1360 ccs + 1x RUT Sep 1140/1170 dps

    Next week:
    I am planning to open new position in October SPX. I am thinking about selling 7x SPX Oct 1840/1860 credit put spreads and 5x SPX Oct 2200/2220 credit call spreads. Let's see where SPX opens on Monday.
    The September SPX position is pretty safe now. I would adjust it when SPX is around 2000 or 2140.
    I may adjust the September RUT credit put spreads if RUT falls under 1190 next week. If that happens I will roll the RUT Sep 1120/1140 cps to RUT Sep 1060/1080 cps.
    Plus, if RUT falls under 1190, I will sell to open credit put spreads in October RUT (most likely RUT Oct 1030/1050 cps).