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Saturday, February 13, 2016

Weekend Portfolio Analysis (February 13, 2016)

The S&P500 went from 1,873.25 to 1,864.78 this week, for a 0.45% loss, now down 8.77% Year To Date. An extremely busy week at work with barely any time to look at the markets, unlike the hundred something people I follow on Twitter, who all seem to be dedicated full time traders with plenty of time to tweet and trade all day long. Envy devours my soul.

Recent Trading Activity

- Closed SPY Feb/Apr 183/200 Victory Spread for a $105 loss on Wednesday

Market Conditions
(Click on image to enlarge)
Stochastics: 27 (neutral)
McClellan: -13 (neutral)
Stocks above their 20 DMA: 37% (neutral)

No man's land. Closer to an oversold extreme.
In the previous Weekend Portfolio Analysis, we mentioned that it was possible to revisit the 1,820 lows, which were more than 3% away back then. The market was not trading at an oversold extreme and therefore it had plenty of room to move. Well, 1,810 was touched forming a triple bottom on the 3 year chart.

We're now closer to a short term oversold extreme and therefore, according to my system I see limited downside room. I favor a little rebound and think we're on our way to 1,940 - 1,950. What I or anyone thinks is irrelevant, but why else would you come to this site? If we get to see this move I mentioned, it will be possible to sell Jun30 Credit Call spreads above 2,175 for 2.20 credit or better (25 point wide spreads) which I would trade via unbalanced Iron Condor with the Put side around 1,500. We'll see if we get the chance.


Current Portfolio

March IWM 112/112/120 Synthetic Stock Hedged
Speculative bullish bet on the Russell Index. Possibly a lost cause. Max risk on this play is only $520. Not looking at it at all.

May31 SPX 1475/1500 Credit Put Spread
$1,560 credit. 10 deltas. Looking safe. When the 1,810 lows were reached on Wednesday, this  was my worst position. Do you want to know how bad it was? it reached 13 deltas. And that was the worst position. Meaning my trading stress levels are really low at the moment and I'm not too concerned about market falls.

April SPY 204 Long Calls
Speculative small bullish play using only $420 debit. Less than 0.5% of the portfolio. I'm just happy exiting for break-even here.

April29 SPX 1450/1475 Credit Put Spread
Total credit of $1,440. Looking great with only 7 deltas and 11 weeks to expiration. I will be exiting in a few days, but probably not this week.

May31 SPX 2125/2150 Credit Call Spread
$1,250 total Credit. Showing nice gains and only 5 deltas at the moment. No concerns for now.

Action Plan for the Week
I'm not sure if an oversold extreme reading was achieved this week intra-day. Maybe it was, I'm not sure as I wasn't looking but the only component missing was the McClellan oscillator and it may have fallen below -150 at some point during Thursday's session. What we can indeed see is the price moves of different options and it looks like it was possible to sell RUT 720/710 for 0.85 - 0.90 during the session. That would have been an attractive play in my book, and better than the 730/720 alternative that I had spoken about last weekend.

Anyways, my plan for the upcoming days:

- Exit the April SPY 204 Calls for break-even given the opportunity.

- If we fall hard, reaching an oversold condition, sell May31 RUT 720/710 for 0.80 credit or better.

- If we rally into the mid 1900's, initiate an unbalanced Iron Condor position, 1475/1500/2175/2200 using June 30 options. Maybe 25 points higher or lower on either side, really depends on how volatility moves. It could be 1450/1475/2150/2175, but the lower the Call side, the less aggressive I will be. My initial target date is Friday, although I may postpone it if I don't see attractive credits or we stay too close to an oversold extreme.

- Updated adjustment points for existing Credit Spread positions:
   . Defend Apr29 1475/1450 Credit Put spread if SPX falls to 1,600 (very unlikely)
   . Defend May31 1500/1475 Credit Put spread if SPX falls to around 1,635 (very unlikely)
   . Defend May31 2125/2150 Credit Call spread if SPX reaches 2,020 - 2,025 (unlikely)

It's been a rough start to the year and we're still negative performance-wise. However, the income positions are looking great and healthy to trigger a turn around. When trading stress-free we are less prone to making stupid mistakes, which is the reason why I love these conservative positions. There is no reason to rush any decision here and we are not threatened at all, which gives us plenty of time to lay out coherent an effective trading plans. Cold mind, emotion-free, way in advance.


Forex
The EURUSD long position initiated last week made some more progress. Now 144 pips in profit after that little pullback on Friday, which didn't trigger exit conditions.

The Stop Loss has been automatically moved to break-even, thanks to an intensely tested upgrade to the LT Trend Sniper robot, to be released soon along with an update to the documentation.

This week, I also went long spot GOLD, via the XAUUSD symbol. This is a new robot that trades based on José Canseco's views on the market: My new invention has been baptized as The Canseco Trading Robot. The robot reads Canseco's tweets, and based on his infinite wisdom trades Gold accordingly. Just kidding. It is the same LT Trend Sniper system, which shows nice results with Gold and I decided to incorporate it to my speculative activity.

Bought at 1,189.98.
Some profits were seen shortly after the entry. The Stop Loss (red horizontal line) has been automatically moved up to 1,230 by the robot, guaranteeing a minimum profit of around +4% for the overall portfolio. Nice start to the year.


Economic Calendar
Tuesday: German ZEW Economic Sentiment
Wednesday: US Building Permits, Housing Starts, CPI. China's CPI
Thursday: Philly Fed, Crude Oil Inventories
Friday: US CPI & Core CPI


Options Trading results - With closed positions and trading costs included, we are down 3.04% for 2016 while the market is down 8.77%. The portfolio is currently 38% at risk, 62% in cash.

Forex Trading results - Up +7.06% for the year via the long EUR and long Gold positions, which are still in play.

Stay tuned. On Tuesday, I will be talking about the results of ETF Rotation Systems in 2015.
Good luck this week my friends.
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 to the last detail.

Check out 2016 Track Record


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