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Saturday, May 14, 2016

Weekend Portfolio Analysis (May 14, 2016)

The S&P fell for the third consecutive week and it is now up only 0.13% for the year. It was an unusually active week for your pal LT where we had a chance to clear out inventory, leaving the portfolio positive for the year and with very little exposure left at the moment. You guys know I have been waiting for months to turn the year around, and also know I have been unusually bearish for a while, which is pretty uncommon for a guy who rarely ever has a bias and tries to be 100% mechanical.

It feels good to finally be positive for the year and have this opportunity now, almost with no inventory, to counter-attack after so many punches and dodged bullets. The portfolio was never down more than 3.5% all this time, but it has certainly been a struggle to get out of this shallow yet extended draw-down.

The S&P500 is now at the same level that it was during mid November of 2014. Yeap. 18 sweet months going nowhere.

Recent Trading Activity

- Closed May31 SPX 2125/2150 Credit Call Spread + SPX 2150 Long Calls & 1885/1890 Credit Put spread for an overall loss of $165. I'm happy with this result considering how in trouble the original 2125/2150 CCS was at one point reaching more than 40 deltas. Small manageable loss in the end of less than 0.2% of the portfolio.

- Closed the July29 unbalanced Iron Condor entirely for a $1,356 gain, basically opening space for a brand new July position this upcoming week.

- Closed the 2225/2250 Credit Call side of the August unbalanced Iron Condor for a $980 gain. Put side still in play.

Market Conditions
(Click on image to enlarge)
Stochastics: 41 (neutral)
McClellan: -138 (neutral)
Stocks above their 20 DMA: 32% (neutral)

No man's land but fairly close to a short term oversold extreme.
A small 1%, 1.5% decline from here would easily get us there and I would be looking to sell a June Credit Put spread position at or below 1,875. Because there is about just a month until expiration, this decline would have to happen quickly, otherwise it won't be so easy to see the 1875 strike price reaching 10 deltas and I will have to start thinking about deploying via July options. Keep in mind, if the decline happens, the financial media will be finding news to justify the Armageddon that is coming. So, if you're still one of those Credit Spreads traders with a happy trigger when it comes to selling Calls, but always afraid of selling Puts, get mentally ready in advance. Selling Puts is ALWAYS, way way better than selling Calls. Even if the end of Humanity does indeed come.

Current Portfolio

July SPY Long 169 Puts
Portfolio Insurance.

August SPX 1750/1760 Credit Put spread
The remainder of the August Unbalanced Iron Condor. This CPS is currently showing 10 deltas, so, there is nothing to be concerned about for now. There is still lots of time until expiration and I will just continue riding it until 75% to 80% of the max profit can be booked.

Action Plan for the Week

- I'm planning to buy new portfolio insurance using SPX September options. I won't simply go long Puts this time around. Instead, I will buy a 1825/1800 debit Put spread, partially financed by a 1625/1600 Credit Put spread. This will be very cheap insurance to carry that will basically offer downside protection down to around 1615. The idea came to me thanks to Dan from who was kind enough to share it in private with me and a few other folks a few months back. It has taken me a while to really digest it and feel comfortable with this approach and I'm ready to start using it with real money. LTOptions members will receive additional information during the week about this portfolio insurance strategy and some ideas on how to manage these positions.

- If we reach a short-term oversold condition, I will sell a June Credit Put spread with SPX options. My goal is to be able to sell at or below 1,875.

- If the market moves up instead, my go to strategy will be a July SPX unbalanced Iron Condor. It would be nice to position the short Put around 1,825 and the short Call at or above 2,175. But this will depend on how far up the market moves until Friday.

The LT Trend Sniper closed its long XAUUSD (Gold) trade seeing that no progress was being made. The exit was at 1283.52 (from a long entry at 1290.61), resulting in a small 0.59% loss.

After 6 trades this year, there haven't been strong trends neither in the Euro nor in Gold, so it is a mediocre start consisting of 2 wins and 4 losses. However, the account is only down 0.01% for the year, thanks to the fact that winners are larger. So, we're basically flat.

We'll see how the rest of the year unfolds. I'm expecting 6 more signals. One solid good trend would be enough, but only time will tell.

Economic Calendar
Sunday: China's Industrial Production
Monday: US Budget Balance
Tuesday: Building Permits, Core CPI, Housing Starts
Wednesday: Europe CPI, US Crude Oil Inventories
Friday: Existing Home Sales

Options Trading results: Up +0.89% YTD vs S&P up +0.13%. Portfolio 18% invested, 82% cash.
Forex Trading results: Down 0.01% for the year. No position at the moment.

Good luck this week my friends!

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