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Saturday, July 9, 2016

Weekend Portfolio Analysis (July 8, 2016)

Up until yesterday, a good jobs report would bring the market to its knees. Supposedly due to "fears of an Interest Rate hike". So, the better the economy (more jobs), the weaker the markets. Poor souls that are starting to learn about this joke of an industry. Friday, of course, was an exception, and good news went back to being good news; to prove, once again, that trying to apply any type of logic to a chaotic environment is a futile exercise where, in almost all cases, the same argument can be used to justify both an up move and its exact opposite. 
The S&P 500 Index is now up +4.21%, which is pretty decent considering all that's been thrown at it this year and that we are barely past the mid-point mark.

Recent Trading Activity

- No trades as none of the conditions outlined in the previous weekend analysis materialized.

Market Conditions
(Click on image to enlarge)
Stochastics: 94 (overbought)
McClellan: +151 (overbought)
Stocks above their 20 DMA: 73% (overbought)

We just reached an overbought condition, or what I like to call a "short-term overly optimistic scenario". Always hard to trade because the VIX is low in situations like this one. Consequently, options are not juicy anymore and you have to get close to current price action if you want to get some credit to make your efforts worth it. Because I'm never in any rush to sell Calls, I decided to wait until Monday and see if the rally keeps going. That way, I can get a bit further up with my position and if the market declines and the opportunity is missed, fine: the two credit call spreads positions in the portfolio would benefit from that decline.

I'm not being too greedy this year. Trading what has become a larger account forces me to be a pussy. If I hadn't had any Call side exposure I would have gone with an August 2200/2210 for 1.00 credit or better on Friday; but in my current situation I'll wait and see if I can get 2205/2215 for that same credit, or better yet: 2210/2220.

Current Portfolio

July SPY Long 169 Puts
Portfolio Insurance. Will expire for max loss this week.

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

July SPX 1890/1900/2175/2185 unbalanced Iron Condor
This one expires this Friday. I'm not really concerned. Call side showing 5 deltas and would only reach 30 deltas if SPX reaches 2165-2170 early in the week.

August SPX 1890/1900/2190/2195 unbalanced Iron Condor
6 weeks to expiration now. 16 deltas on the Call side. It will reach 30 deltas if SPX reaches 2160 this week.

Action Plan for the Week

By the end of this week, the account should be up +4.45% for the year. This is because the July Iron Condor is very likely to expire successfully for max profit. The SPX index is 2.5% above its own 50 Day Moving Average. Usually, above 3% starts to become a stretch and some downside action therefore expected, or at least sideways action as the moving average shortens the distance before a next leg up. For this reason, IMHO, we are not likely to see SPX 2,150 this week. Based on this hypothesis, the July Iron Condor should expire for max profit easily without any threats and the August Iron Condor would not need a Call side adjustment this week. However, we still need to plan for the worst, because the market Gods are cruel Gods.

- Adjust the August 2190/2195 Call side it reaches 30 deltas (SPX 2160 or so). A new Credit Call spread around 2230 with the same August options would be deployed, doubling the number of contracts to make it a fully balanced Iron Condor. That level up there (2230) seems like a very tall order for this market in August.

- Defend the July 2175/2185 Credit Call spread if SPX reaches 2165 very early in the week. I see this as an extremely remote possibility.

- If the market keeps going up, I'd like to initiate an August RUT 1250/1260 Credit Call spread position for 1.00 credit or better,

- If the market declines, or move sideways I won't do anything.

The Long Gold position by the LT Trend Sniper is still in play, working out well with about a 3% gain for the portfolio. Of course, part of these gains can disappear by the time the position is closed, but giving it time to work is the necessary ingredient for hitting homeruns with a trend follower. Pretty frustrating at times, but that's the price and there is no way around that. The robot already moved the SL to break-even. So, at least, this is a free position now.

The blue arrow was the entry point a few days ago and the small horizontal blue line was the original Stop Loss level.

In the case of the EURO, the short position was closed on Friday for a tiny loss. It has been a frustrating year for trend following strategies in the Euro and Gold. Every break-out seems to just fade immediately, but at least the Sniper is keeping losses well under control, waiting for the next big hit. This was a small loss of only 0.73% of the account. 
The red horizontal line was the original stop loss. First red arrow was the entry. So, tiny loss here.
The LT Trend Sniper system is now down 3.77% for the year. I'm not counting the current profitable balance in the Buy Gold trade, as it is not a closed position, but that one has the potential to turn it all around. Gold is looking strong, shaking off that positive jobs report number on Friday.

Economic Calendar

Wednesday: US Crude Oil Inventories
Thursday: US PPI. China's GDP and Industrial Production
Friday: Europe CPI. US CPI, Retail Sales and Industrial Production

Options Trading results: Up +2.77% YTD vs S&P up +4.21%. Portfolio 45% invested, 55% cash.
Forex Trading results: Down 3.77% for the year. Currently Long Gold (XAUUSD)

Have a nice week folks!

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