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Saturday, November 14, 2015

Weekend Portfolio Analysis (November 14, 2015)

From the beginning of the year, until the end of the July options expiration cycle I played only 8 positions....and it was wonderful. Having so little capital committed, such low risks, so much simplicity when you are only paying attention to that one thing. In the first seven months of the year I only played one position per month except in March where I traded two positions.

Since then, I have been involved in 26 positions. In barely 5 expiration cycles, two of them not even over yet. Every time this happens it is a bad symptom. Not that I'm not playing by my system's rules, but that the market has not accommodated to my strategy and I'm being forced to adjust, hedge, defend and also overspend in commissions. This is why I love the Lazy mantra, the low stress, the low trading costs. Every time you are going to enter a new trade, while having some already on, make sure you are not trading for the sake of doing it, make sure you are not trading just to scratch an itch. 

Market Conditions
SPX from 2096.56 down to 2023.04 for a -3.5% return in what constitutes the second worst week of the year. The Index is now down 1.74% Year to Date.

(Click on image to enlarge)
Stochastics: 5 (oversold)
McClellan: -205 (oversold)
Number of stocks above their 20 DMA: 30.71% (almost oversold)

We're very very close to a short term pessimistic extreme. In addition to this the VIX is now above 20 making options selling much more attractive. This is a good scenario for Credit Put spreads selling. For example you can now sell the January SPX 1750/1745 Credit Put spread for 0.30 credit or better, really far from the current price of 2023 and in the middle of the historically strongest period for the markets, where a crash has never happened. Pretty good odds down there. I would have done this trade with no problem if it weren't for the fact that I am waiting for the Model Portfolio size poll to be closed tomorrow. That will determine position size and everything going forward so I didn't want to rush this trade. If the chance is loss, then so be it. Anyways, good opportunity if this weakness persists for a few more days.

November positions
SPX 1630/1640/2160/2165 Iron Condor
This will be a winner on Friday.

SPX 1945/1950 Credit Put spread
90% probability of success. The market is 3.6% above this level so chances are good for this one to be a winner. However, anything can happen. A correction down to the 1970's would have me defending the position: closing for a loss and deploying a new Credit Put spread in the 1700's with December options.

December positions
SPX 1880/1885/2190/2195 Iron Condor
With SPX currently at 2023 this Iron Condor is not looking bad. I'll set a price alert around 1960 or so.

RUT 1010/1015 Credit Put spread
This used to be an Iron Condor whose Call side I closed this past week for a small profit. The Put side, still in play, looks good here with RUT priced at 1146. Price alert set at 1070 for this upcoming week anyways. If an adjustment is needed, the new position will be deployed in the very low 900's.

Action Plan for the week
My goal for the week is to see both November positions expire. But if SPX corrects significantly, I will defend the Nov SPX 1945/1950 Put spread as described above.

As for new positions, unlikely given my current exposure. Although I can add a couple more contracts to the Dec RUT 1010/1015 Credit Put spread, which is a half sized position only.

The LT Trend Sniper robot is still short EUR/USD. The position didn't make much progress this week as the currency pair fell first and then recovered some of the losses.

Entry line in green, Stop Loss line in red 194 pips higher.
The position is 83 pips in profit at the moment.

This trade is not out of the woods yet. It can still be a losing position, but it is very unlikely for it to exit at Stop Loss at this point, so it would be a tiny loss. If the pair keeps moving sideways a few more days the robot will exit the position based on the "lack of progress" rule, and it may very well be at a profit.

Economic Calendar
Nothing extraordinary on the news front. It could be a quiet week.

Monday: Europe's CPI
Tuesday: German ZEW Economic Sentiment. Europe's Core CPI. US CPI and Industrial Production
Wednesday: US Building Permits, Housing Starts, Crude Oil Inventories
Thursday: Philly Fed Index
Friday: Europe GDP. US Retail Sales, Core Retail Sales, PPI.

Good luck this week folks!


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