Well, September expiration is in the books and I saw the following positions expire for max profit:
RUT 1330/1340 Credit Call spread
RUT 900/910 Credit Put spread
SPX 1650/1675 Credit Put spread
This would have resulted in a 5.75% draw-down for the month, but I had an additional little loser:
SPY long 147 Put.
This long Put idea was an insurance play, bought just in case the market kept crashing. A small price to pay for piece of mind in the middle of the debacle.
So, in the end, September brought a 6.16% draw-down with trading costs included. The track record has already been updated. The market is now down 4.70% for the year while the model portfolio is up 11.93%. It's good to finally be done with September and be able to focus on brand new positions for the rest of the year. My goal of a +30% return for the year will not be achieved, but there is just so much risk you can take before blowing up. Had I not made adjustments to my trades I would have ended up making a lot of money in the September cycle, as the market rebounded immediately after the crash. But what if? what if I hadn't defended the positions and the market ended up truly crashing? That's the risk I never want to take. So, when you see a credit spread trading newsletter out there showing a 50% return for the year, don't just look at the number in black and white. Dig a little deeper. Look at how positions are defended (if at all). Assess how responsible or sustainable the trading method is. Ask yourself what will the results be during really violent market moves? Most Credit Spreads/Iron Condor newsletters that show 40% - 60% annual returns, in fact all of them, eventually blow up as they delay their adjustments way too much, and in many cases just refuse to defend their positions at all when price penetrates their strike prices. Refusing to acknowledge failure by taking a loss they just start "hoping" for a market reversal. At that point it becomes gambling more than anything. It may not happen in a year or two, or three. You will enjoy 60% annual returns, until, one day, you inevitably end up with an 80% draw-down, and all is gone, forever.
Market conditions
This week the SPX went from 1963.06 to 1958.03. Negligible move. The Fed didn't move interest rates and I won't talk about the implications of that as it is a useless exercise. Neither will I base my trading on correctly predicting whether rates will be increased in October or never again in our lifetime.
This week I also started to trade the November cycle via a 1630/1640/2100/2110 SPX Iron Condor
and I also tried to execute an SPX October 2100/2105 Credit Call spread whose fill I never got.
A Chart of the SPX and the current levels of interest to me.
(Click on image to enlarge)
Stochastics: 63 (neutral)
McClellan: +89 (neutral)
Number of stocks above their 20 Day Moving Average: 57% (neutral)
Support: 1820, 1865
Resistance: 2040, 2135
No man's land here, and with an elevated VIX it is the ideal scenario for Iron Condors, reason why I opened one yesterday. Notice how I removed the old uptrend channel that had been in play for so long. Now I'm more focused on sideways action and horizontal price levels.
October positions
SPX 1700/1710/2195/2200 unbalanced Iron Condor
Looking great. 95% probability of success at expiration. Plenty of room from the current SPX price (1958) to either side of the position. I won't touch it.
November positions
SPX 1630/1640/2100/2110 Iron Condor
This is the position initiated yesterday. Not much to talk about here, just lots of baby-sitting time ahead.
Action Plan for the week
For now I will just ride the two Iron Condors. Both are safe and I will let that Theta Decay work for me for a while.
As for new trades, I'm not done with the October cycle. If we get an extreme price condition I will use RUT October options. This is what I'm looking at with RUT. Notice that I also removed old uptrend lines.
(Click on image to enlarge)
If we reach an extreme pessimistic reading, I want to sell Puts below all those horizontal lines. With a 3% or 4% decline this week, selling an October RUT Credit Put spread in the mid 900's will be a nice trade for a nice premium (0.60 or better), with little time to expiration.
If we see strength, I'm talking about revisiting the recent 1193 high, selling the 1250/1260 Credit Call spread would be an interesting play, looking for a credit greater than 1.00. Also using October options.
We're talking about plus 3% moves in both cases which is not typical for just a week of market action. If no short term extreme price action takes place, I will simply refrain from adding new positions.
Economic Calendar
Monday: US Existing Home Sales
Tuesday: German PMI, Europe's Manufacturing and Services PMI. US Crude Oil Inventories.
Wednesday: Durable Goods Orders, New Home Sales
Thursday: US GDP, Services PMI, Michigan Consumer Sentiment
Friday: US Personal Spending and Pending Home Sales
Good luck this week folks!
Check out 2015 Track Record
RUT 1330/1340 Credit Call spread
RUT 900/910 Credit Put spread
SPX 1650/1675 Credit Put spread
This would have resulted in a 5.75% draw-down for the month, but I had an additional little loser:
SPY long 147 Put.
This long Put idea was an insurance play, bought just in case the market kept crashing. A small price to pay for piece of mind in the middle of the debacle.
So, in the end, September brought a 6.16% draw-down with trading costs included. The track record has already been updated. The market is now down 4.70% for the year while the model portfolio is up 11.93%. It's good to finally be done with September and be able to focus on brand new positions for the rest of the year. My goal of a +30% return for the year will not be achieved, but there is just so much risk you can take before blowing up. Had I not made adjustments to my trades I would have ended up making a lot of money in the September cycle, as the market rebounded immediately after the crash. But what if? what if I hadn't defended the positions and the market ended up truly crashing? That's the risk I never want to take. So, when you see a credit spread trading newsletter out there showing a 50% return for the year, don't just look at the number in black and white. Dig a little deeper. Look at how positions are defended (if at all). Assess how responsible or sustainable the trading method is. Ask yourself what will the results be during really violent market moves? Most Credit Spreads/Iron Condor newsletters that show 40% - 60% annual returns, in fact all of them, eventually blow up as they delay their adjustments way too much, and in many cases just refuse to defend their positions at all when price penetrates their strike prices. Refusing to acknowledge failure by taking a loss they just start "hoping" for a market reversal. At that point it becomes gambling more than anything. It may not happen in a year or two, or three. You will enjoy 60% annual returns, until, one day, you inevitably end up with an 80% draw-down, and all is gone, forever.
Market conditions
This week the SPX went from 1963.06 to 1958.03. Negligible move. The Fed didn't move interest rates and I won't talk about the implications of that as it is a useless exercise. Neither will I base my trading on correctly predicting whether rates will be increased in October or never again in our lifetime.
This week I also started to trade the November cycle via a 1630/1640/2100/2110 SPX Iron Condor
and I also tried to execute an SPX October 2100/2105 Credit Call spread whose fill I never got.
A Chart of the SPX and the current levels of interest to me.
(Click on image to enlarge)
McClellan: +89 (neutral)
Number of stocks above their 20 Day Moving Average: 57% (neutral)
Support: 1820, 1865
Resistance: 2040, 2135
No man's land here, and with an elevated VIX it is the ideal scenario for Iron Condors, reason why I opened one yesterday. Notice how I removed the old uptrend channel that had been in play for so long. Now I'm more focused on sideways action and horizontal price levels.
October positions
SPX 1700/1710/2195/2200 unbalanced Iron Condor
Looking great. 95% probability of success at expiration. Plenty of room from the current SPX price (1958) to either side of the position. I won't touch it.
November positions
SPX 1630/1640/2100/2110 Iron Condor
This is the position initiated yesterday. Not much to talk about here, just lots of baby-sitting time ahead.
Action Plan for the week
For now I will just ride the two Iron Condors. Both are safe and I will let that Theta Decay work for me for a while.
As for new trades, I'm not done with the October cycle. If we get an extreme price condition I will use RUT October options. This is what I'm looking at with RUT. Notice that I also removed old uptrend lines.
(Click on image to enlarge)
If we see strength, I'm talking about revisiting the recent 1193 high, selling the 1250/1260 Credit Call spread would be an interesting play, looking for a credit greater than 1.00. Also using October options.
We're talking about plus 3% moves in both cases which is not typical for just a week of market action. If no short term extreme price action takes place, I will simply refrain from adding new positions.
Economic Calendar
Monday: US Existing Home Sales
Tuesday: German PMI, Europe's Manufacturing and Services PMI. US Crude Oil Inventories.
Wednesday: Durable Goods Orders, New Home Sales
Thursday: US GDP, Services PMI, Michigan Consumer Sentiment
Friday: US Personal Spending and Pending Home Sales
Good luck this week folks!
Check out 2015 Track Record
Go to the bottom of this page in order to see the Legal Stuff