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BookingAlpha Option Trading Advisory

Saturday, July 16, 2016

Weekend Portfolio Analysis (July 16, 2016)

Frustrating. That's the only description possible. A frustrating week on a frustrating year. Not that I have suffered a huge draw-down or anything like that, but man, has it been hard to make progress in 2016, easily the toughest year ever for my trading style. I'm even going to stop sending emails for these articles for a while, until I feel they are worth it. I don't want to keep begging: "hey please, come to my website! It sucks, but please come". Na, na, na, na, na. No emails and self-promotion for a while. I'll keep posting my trades on Twitter, just for consistency and a commitment to transparency. The email campaigns however, will stop for a while, as I don't want to be bothering with irrelevancy.

Fortunately, there is always something to be happy about. Using different trading and investing approaches simultaneously, increases the likelihood of some part of your capital growing nicely; something I discussed in Frustration. My long term investments in dividend growth companies are doing great. For example, my Canadian TFSA account (Roth IRA equivalent), is up 13% for the year and paying me more dividends than ever before, which is nice. This account includes all 10 companies mentioned in the Invest and Retire Before you Die series plus a couple more. It's just boring to talk about it, as I rarely ever do anything with those funds. So, not everything is terrible, and there are always reasons for happiness. It just so happens that, selling Options has been tough business this year, which is what I like to talk about more frequently. A greater intellectual challenge.

Recent Trading Activity

- Initiated an AUG SPX 2210/2215 Credit Call Spread position for a credit of $1,000 on Monday

- Adjusted the Call side of the AUG SPX 1890/1900/2190/2195 unbalanced Iron Condor on Tuesday. Closing the 2190/2195 brought a loss of $2,360. A new SPX 2260/2270 Credit Call spread was deployed for a credit of $1,800 to mitigate that loss. Between the Put side (1890/1900) and the Call side, there is a total accumulated credit of $3,060. Enough to eclipse this week's loss and then some.

- Adjusted the Call side of the JUL SPX 1890/1900/2175/2185 Unbalanced Iron Condor on Thursday. Closing the 2175/2185 was done at a loss of $750. Even though the call side was closed at a loss, the position overall ended up profitable because the Put side expired, bringing a profit larger than the loss from the Call side. As part of the Call side defense, a 2300/2310 Credit Call spread was deployed using October options, for a new credit of $1,900.

- The Put side of the JUL SPX 1890/1900/2175/2185 position expired worthless on Friday, for a gain of $1,100.

- The JUL SPY 169 Long Puts (portfolio insurance) expired this morning, Saturday the 16th, for max loss of $453.

Market Conditions
(Click on image to enlarge)
Stochastics: 94 (overbought)
McClellan: +102 (neutral)
Stocks above their 20 DMA: 83% (overbought)

No man's land. Even though price has barely retraced, the McClellan oscillator is already falling. Could be a signal that momentum has stalled. I would trade an IC under these circumstances, but there is already enough exposure in the portfolio, so no new positions for me by now.

I've been thinking deep and hard about this week's losses and the insane price action seen this year; the validity of selling Calls; the possibility of doing things a little different. Using Unbalanced Iron Condors has definitely been a positive move. It has kept me away from significant losses, but a trader can't simply be happy with the status quo without trying to improve whenever possible.  Growth as a trader is first achieved internally (discipline, self-confidence, auto-control), but after that, you just can't rest in your laurels. It's a constant struggle. New approaches must be explored and everything must be constantly questioned. There will be slight changes in my trading, which I will talk about on Tuesday.

Current Portfolio

September SPX 1825/1800 Debit Put Spread + 1625/1600 Credit Put Spread
Portfolio Insurance

October SPX 1825/1800 Debit Put Spread + 1625/1600 Credit Put Spread
Portfolio Insurance

August  SPX 2210/2215 Credit Call Spread
$1,000 credit. This is the only one in relative danger at 19 deltas. Adjustment point around SPX 2,180 this week. It is half-sized, so, I'm not too concerned.

August SPX 1890/1900 Credit Put Spread
$1,260 credit. Safe.

September SPX 2260/2270 Credit Call Spread 
$1,800 credit. Safe for now.

October SPX 2300/2310 Credit Call spread
$1,900 credit. New position. No concerns.

Action Plan for the Week

- If SPX hits 2180, I will have to defend the August 2210/2215 CCS. I would be deploying more contracts as this is a relatively small position. If the markets fall a bit, this is a position I will gladly close for break-even, given all the upside exposure in the portfolio.
- I'm also planning to manage the longer term positions of SEP and OCT earlier for 50% or 60% of the profits and be able to trade those cycles again as they approach 8 weeks to expiration.

The Long Gold position by the LT Trend Sniper was finally closed on Wednesday after giving away part of the profits. Always a bit annoying but expected on a trend follower who aims to follow truly extended moves. Unfortunately, both Gold and the Euro currency have been pretty choppy this year. This was in the end a small 0.76% gain and there is no open position at the moment.

Economic Calendar

Tuesday: US Building Permits. Housing Starts.
Wednesday: US Crude Oil Inventories.
Thursday: ECB President Draghi speaks. Existing Home Sales. Manufacturing PMI.

Options Trading results: Up +0.14% YTD vs S&P up +5.76%. Portfolio 64% invested, 36% cash.
Forex Trading results: Down 3.03% for the year. No position at the moment.

Have a nice week folks!

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