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Saturday, September 17, 2016

Weekend Portfolio Analysis (September 17, 2016)

SPX from 2120.86 to 2139.16 for a +0.86% week. The index is now up 4.66% year to date.

I must say this was an interesting week, and here's why:

- Financial talking heads were bearish on Sunday, after Friday's scary red bar.

- At the end of Monday everybody was bullish again!

- Most experts reconsidered their stance and turned bearish again by end of day Tuesday.

- Bullish again on Thursday! Yay!

It was just too orgiastic.
You have to seriously consider the sources you follow (be it TV, Twitter or sexy hotties on Snapchat), because they all have the potential to influence your bias, and this kind of senseless flip-flopping is just a disservice to humanity. Reason why, as boring as it is, I continue praying the gospel of trading with odds without relying on perfect directional forecasts, as a good Priest. Except for the celibacy part, of course.


Recent Trading Activity

- September Portfolio Insurance position expired on Friday. A $160 loss.

- September SPX 1980/1970 Credit Put spreads expired for a $1200 gain on Friday


Market Conditions 

(Click on image to enlarge)
Stochastics: 26 (neutral)
McClellan: -126 (neutral)
Stocks above their 20 DMA: 35% (neutral)

No man's land but close to a short-term oversold extreme.

A 2,110 print this week would put us at the lower end of the wedge. According to the Quran: "rising wedges prelude an eventual break to the downside". That's what the holy book says, but according to the LT Mantra: "A short-term overly pessimistic condition shall be traded via out of the money Credit Put spreads". So, what's a wise man to do?  Of course, sell the spread. It gives you plenty of room for error. If we get that hypothetical decline to 2110, selling a November CPS in the 1,850's will be possible for decent credit and that would be my go to play.


Current Portfolio

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


October RUT 1100/1110/1320/1330 Unbalanced Iron Condor
$2,200 credit. 5 weeks to expiration and a solid 86% probability of success now. Comfortable on both ends:

(Click on image to enlarge)
 A thing of beauty.....[sigh].


October SPX 2005/2015 CPS, hedged with a Long SPY 206 Put
This is the remainder of what originally was a Lazy Elephant.
The 2015 short Put is showing 14 deltas, as opposed to 20 last weekend. Smallish position, so I'm not too worried. The game plan here is to keep it until it shows profits, and then I'll make a decision. I don't want to be holding it past September. So, I'll give it a couple more weeks.


Action Plan for the Week

- Sell Nov Credit Put spread in the mid 1800's if we reach an oversold condition.

- Defend SPX 2005/2015 Credit Put spread if the index falls to 2,090 or so. I would take gains from the long 206 SPY Put and would deploy a new Credit Put spread in the 1,875 neighborhood using the same October options.

- Defend the RUT 1100/1110 Credit Put spread if the index falls to around 1,165. The adjustment would be deployed around RUT 1,000. Still using October options. This is a very unlikely scenario as RUT currently trades near 1,225. So, it would imply a 5% fall in just a week. Unlikely.

- If we correct in severe fashion (I'm talking about number of stocks above 20 DMA, at or below 15%), I will deploy a Synthetic Stock Hedged position to capitalize on a possible V-Shape rebound.

- If instead of correcting we see a rally, then I will be inclined to sell an Iron Condor on Friday. The November expiration cycle will be 8 weeks away. Time to start addressing it. At this point I'm more inclined to using RUT, simply because it will allow me to position the Call side of the Iron Condor above the upper end of the uptrend channel (above 1320 by November)
Yes, the elections are in November, before Options expiration that month. Any November position not closed before the elections is a potential temptation for the Option Gods to ravage. Establishing the position from now, gives plenty of time to make some money and be done with it prior to elections day.


Economic Calendar
Markets possibly in waiting mode until Wednesday.

Tuesday: Building Permits, Housing Starts
Wednesday: Crude Oil Inventories. FOMC. Fed Chair Yellen speaks


Options Trading results: Up +4.48% YTD vs S&P up +4.66%. Portfolio 31% invested, 69% cash at the moment.

Take it easy, but take it!
LT

If you are interested in a responsible and sustainable way of trading options for consistent income with solid risk management, consider acquiring LTOptions, my options trading system to the last detail.

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