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Sunday, April 17, 2016

Weekend Portfolio Analysis (April 17, 2016)

Your pal LT has been working his butt off recently, but for a good cause. We're currently building such cool stuff at work, that honestly, I haven't even felt tired at all, even working 10 to 12 hours a day, including Saturday. That's what usually happens when I'm learning something new or building something that I consider really interesting. I guess that little "excitement bug" about software development hasn't died in me. Which is great because it pays well. If anything, this week proved to me that I have a lot left in the tank. Now, give me something boring, repetitive, and I immediately start to question the meaning of life. First World problems. I feel I can be a good, productive software engineer for 5 more years, perhaps 10. Beyond that is a stretch. It is a youngsters' realm. Who are we kidding? Unlike so many other fields, showing off a 20-year experience resume kills your chances when competing with the spring chickens. Hence the need to learn about the markets, Real Estate; to learn about other things outside of software; to explore business opportunities, to invest. This is the journey I'm traveling in my little corner of the world, aiming for total financial freedom somewhere between 40 to 45 years of age, not because I hate my job, but out of necessity. A 45 year old programmer is nothing sexy. If I shared more juice about the journey, namely monthly salary, expenses and net-worth updates, I would be an instant sensation. God save me.

But this is not "LT's epic programming". This is not "LT's admirable work ethic". This. This is about the addiction folks. So, let's get to it, shall we?

Recent Trading Activity

- No trading. Just being a nerd.

Market Conditions
(Click on image to enlarge)
Stochastics: 91 (overbought)
McClellan: +50 (neutral)
Stocks above their 20 DMA: 73% (overbought)

No man's land.
I was pretty bearish going into last week. And, as the market keeps going up, I turn more bearish. Of course, that doesn't mean I will start adding downside bets indefinitely, or doubling down on existing bets or anything like that. A bias is just that and it usually doesn't take you too far. A Bias should never take precedence over actual current price action and sensible risk management. Bias and Ego are your enemies. Once you have the mechanics of your strategy well established, then it is all mental from then on. If you are able to overwrite your Ego and Bias by following your risk management plan, even when the actions included in it are in total contradiction with your Bias and Ego, then you are probably doing it right.
Anyways. No man's land, and I will be entering an August Iron Condor by the end of this week or early next one. We'll talk about that in a few paragraphs.

Current Portfolio

May31 SPX 2125/2150 Credit Call Spread
SPX 2150 Long Calls & 1885/1890 Credit Put spread
Hadn't this defense been recently added, I would have had to swallow a loss this past week by getting out of the 2125/2150 Bear Call spread. As it is right now, I can afford to wait until SPX 2115 or even SPX 2120 without having to absorb a much larger loss or anything like that. Same game plan: boundaries are 1910 and 2110. If neither of those values is reached, this position will stay in the portfolio until about the first week of May, where I project to close it all for break-even.

June30 SPX 2150/2175 Credit Call Spread
Some heat, closing the week at 26 deltas. Adjustment point for the week estimated at around 2,095. Adjustment candidate is 2225/2250 using full size.

July29 SPX 1650/1675/2200/2225 Unbalanced Iron Condor
No concerns for this week.

July SPY Long 169 Puts
Portfolio Insurance.

Action Plan for the Week

- If SPX rallies to about 2,095, defend the June30 SPX 2150/2175. I will take a loss and will deploy a new CCS with twice the number of contracts, using 2225/2250.

- If SPX rallies beyond 2,110, close all the May31 SPX options for a loss and deploy a May31 Credit Call spread above 2,200.

- Sell June30 RUT Credit Put spreads if we reach an oversold extreme condition, a 4% or so from current levels.

- Cash gains on long SPY July Puts on an 80%-100% ROI shall the markets fall significantly.

- Close all May31 SPX Positions for a loss if SPX reaches 1,910. In this case I would be simultaneously cashing gains from June Credit Call spreads, July Credit Call spreads and July SPY Long Puts. After closing all this, I would also deploy a new SPX Credit Put spread in the 1600's. I think this scenario of SPX reaching 1,910 is unlikely for this upcoming week.
- Initiate August 31 Iron Condor. My candidate would be 1700/1725/2250/2275. The 2275 strike price is not available yet. From 2250, it jumps straight to 2300. I don't know if the 25 point interval will be available this week. If any reader knows about this, I would appreciate your comments. Basically, why is the 2250-2275 interval not available yet? Does this normally happen in August? How do you know if/when the strike prices will be available?

The long EURUSD position was finally closed by the LT Trend Sniper robot. There haven't been homeruns in a while. It was finally a small 0.75% loss, and 39.4 pips. With both Gold and the Euro retracing it looks like there won't be new entries in a while.

So far, we've made 4 trades in 2016. Two winners and two losers and the Forex portfolio is up +1.33%.

Economic Calendar
Monday: A bunch of FOMC members speak.
Tuesday: Building Permits. Housing Starts. German ZEW Economic Sentiment.
Wednesday: Existing Home Sales, Crude Oil Inventories.
Thursday: European Central Bank press conference. Philly Fed Index.
Friday: Europe Services and Manufacturing PMI. US Manufacturing PMI.

Very, very challenging year so far, but we are hanging there. No major set back or anything like that and the year is still young.

Options Trading results - With closed positions and trading costs included, we are down 0.39% for 2016. The S&P is up 1.80%. The portfolio is currently 38% invested, 62% in cash.

Forex Trading results - Up +1.33% for the year. Four closed trades in total so far: 1 win, 1 loss in EURUSD and 1 win, 1 loss in XAUUSD. No position at the moment.

Good luck this week my friends!

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Check out 2016 Track Record

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