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Saturday, December 26, 2015

Weekend Portfolio Analysis (December 26, 2015)

Just a few days ago, market pundits were theorizing about the end of the human species.

IT IS ALWAYS THE SAME THING.

Fear is exaggerated and the "there is more to come" BS from our beloved Gurus was, is and will always be endless. Little by little they start changing their stance as the market rebounds, hoping no one remembers how bearish they were just a few days ago.

The markets do have a certain relationship with the real economy. But, day to day fluctuations are noisy and anyone's guess. It is so hard to not be influenced by other people's bias and fears. That's why unplugging is the best thing you can do if you still lack confidence in your trading mechanics and psychology as a trader.

We have now rallied 2.5% in the last 4 sessions. Only 20 more sessions like that and the SPX will be above 2,300. Woohhoooooo. How cool would that be?


Recent Trading Activity

- Closed the RUT 1025/1015 Jan Credit Put spread on Thursday for 0.15 debit. Initial credit was 0.60. Profit of $900 in 15 days.

- Sold an SPX 1700/1725/2250/2275 Apr29 Unbalanced Iron Condor on Thursday

- Bought SPY 161 April Puts as Portfolio Insurance on Thursday


Market Conditions
(Click on image to enlarge)
Stochastics: 72 (neutral)
McClellan: +157 (overbought)
Stocks above their 20 Day Moving Average: 52% (neutral)

No man's land. Good for Iron Condors. Not ideal for individual Credit Spreads on one side of the market, as there is plenty of room to go either way.

Volatility has come down with the VIX now in the 15's, making this a better time to purchase some portfolio insurance.

Other than that, horizontal support and resistance areas remain the same forming an incipient sideways channel between 1990 and 2135. We are about to enter the last week of the year which will probably be slow with low trading volumes. History favors the upside this time of the year. Crash possibility: remote, so you can still delay your portfolio insurance purchase a bit.


Current Portfolio
January SPX 1865/1875/2200/2210 unbalanced Iron Condor
$2,300 credit. 3 weeks to expiration. Looking very safe with SPX at 2060.99 and a 93% probability of expiring worthless.

January SPY 169 Long Puts
Anti-crash protection. $486 debit.

March IWM 112/112/120 Synthetic Stock Hedged
Around the break-even mark at the moment after the recent market rebound. Max risk on this play is only $520.

April29 SPX 1700/1725/2250/2275 unbalanced Iron Condor
$2,760 credit. 4 months to expiration. Lots of baby-sitting ahead.

April SPY 161 Long Puts
Anti-crash protection. $462 debit.


Action Plan for the Week 
I'm anticipating a slow market and low volumes with a slight upwards bias. If the markets don't move up, the probabilities of a significant fall are slim in my view. Current positions looking very safe and extremely unlikely to need any defense.

The only thing I may do is take a 20 - 30% profit on the IWM Synthetic Stock Hedged position if the market gives the opportunity. I would have loved to have hit it off the park with this one, but there was no immediate follow through. Now I'm happy with a smaller profit at this point. Again, this will be only if IWM keeps moving up this week, otherwise we stay in the position.


Economic Calendar
Shortened week in the markets with Friday off for New Year.

Tuesday: US CB Consumer Confidence.
Wednesday: Pending Home Sales. Crude Oil Inventories.
Thursday: Chicago PMI. China's Manufacturing and Non-Manufacturing PMI.
Friday: Markets closed.



We are up +1.25% with 2016 options. The portfolio is 64% in cash, 36% at risk.
May you all enjoy this wonderful time of the year folks.
LT

If you are interested in a responsible and sustainable way of trading options for consistent income with solid risk management, consider acquiring LTOptions, my options trading system revealed to the last detail.

Check out 2016 Track Record



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