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Saturday, July 30, 2016

Weekend Portfolio Analysis (July 30, 2016)

For two weeks now, we have been trading inside a very narrow 20 point range. The S&P barely moved this week after opening on Monday at 2173.71 and closing yesterday at 2173.60. Year to Date the index is up 6.34%.

Recent Trading Activity

- Defended AUG 2210/2215 Credit Call spread by adding Long 2215 Calls, partially financed with a sell of 2055/2060 Credit Put spreads on Monday

- Initiated 1970/1980 SPX Credit Put spread on Wednesday position creating an Iron Condor with the existing September SPX 2260/2270 Credit Call spread

Market Conditions
(Click on image to enlarge)
Stochastics: 64 (neutral)
McClellan: -13 (neutral)
Stocks above their 20 DMA: 66% (neutral)

No man's land.

The challenge during rallies in All-Time-High territory, is that we don't have a previous reference point in the new areas. It's hard to set possible resistance zones, unless you practice some Fibonacci black magic. Even though overbought conditions have been relieved through time and sideways price action, we are still more than 3% above the 50 Day Moving Average. My bias for this week is neutral to bearish. Oscillators started to move down and the market really hasn't corrected much. Of course, this is not mandatory, but in my view we are still a little over extended and need to keep digesting the recent exuberance, and even though calling tops is the most frustrating of exercises, in my modest opinion upside is limited this week to around 2,190. That would put the index 4% above its 50 Day average and would be a stretch. I will operate under than assumption.

Current Portfolio

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

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

AUG  SPX 2210/2215 Credit Call Spread + 2215 Long Calls + 2055/2060 Credit Put spread
With the defensive move made this past Monday, it is now a waiting game. I no longer intend to make the max profit of $1,000 here. At the same time I have more upside protection. Good trade off given all the upside risk I had in the portfolio when considering the other positions. This combo won't be touched this week.

September SPX 2260/2270 Credit Call Spread 
$1,800 credit. Safe at just 9 deltas.

September SPX 1970/1980 Credit Call Spread 
$1,200 credit. Just 8 delta. Creates an Iron Condor with the previous position. Safe for now. 7 weeks to expiration.

October SPX 2300/2310 Credit Call spread
$1,900 credit.Safe at 9 deltas. Nothing to do here yet.

Action Plan for the Week

- The only position in some kind of danger at the moment is the SPX AUG 2210/2215 Credit Call spread at 18 deltas. With the defensive addition recently made, it feels much safer. Still, with SPX hitting 2200 I will be adjusting it to the upside. I'm inclined to think this won't be necessary during this  upcoming week.

- If we correct 30 or 40 SPX points, I'll gladly take 50% of max gain on the SEP 2260/2270 and the OCT 2300/2310.

- Finally, I'm thinking about the debut of the Lazy Elephant this week with September options. It would be a RUT position using strikes 1100/1110/1280/1290 and the added long IWM 114 Put, which has the potential to be very beneficial in this low VIX environment. These strike prices are approximations as usual, and may change throughout the week. The plan is to enter it early in the week.


The LT Trend Sniper got out of its short EURUSD position at 1.10168 this week. FX Portfolio down 4.16% now. A bit of a disappointment after a good start to the year. We'll see how the rest of 2016 unfolds.

Economic Calendar

First week of the month, as usual with potential to attract more activity and create larger moves in the markets. We'll see how the markets react to good unemployment numbers this time. Last month good news went back to being good news.

Sunday: China's Manufacturing PMI
Monday: ISM Manufacturing PMI
Wednesday: ADP Non-Farm Employment Change. ISM Non-Manufacturing PMI. Crude Oil Inventories
Friday: Non-Farm Payrolls. Unemployment Change

Options Trading results: Up +1.12% YTD vs S&P up +6.34%. Portfolio 54% invested, 46% cash.
Forex Trading results: Down 4.16% for the year. No Position at the moment.

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