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BookingAlpha Option Trading Advisory

Saturday, December 3, 2016

Weekend Portfolio Analysis (December 3, 2016)

On September 21st, I wrote the following as part of my article Warned:

"...It means that, in a Trump-win scenario, even when he is seen as the bad choice for the financial markets, there still can be a rally simply because uncertainty is removed. We don't have a crystal ball, and it is precisely for this reason that the commonly accepted notion that markets will correct if Trump wins, should not pollute our bias" 

Later on, I also mentioned that:

"...The defeat of the 'market friendly' candidate can still be followed by a rally. Just as it has happened in the past"

(You can read the entire piece here).

Does that make me a genius?
Of course not. Too old for that.
It's simply the getting used to expecting the unexpected. Despite the violent rally that followed the election, we have barely suffered significant pressure in our positions. We're still beating the markets and still with a minuscule worst draw-down (peak to trough) this year of only 4.89% of the portfolio.

Remember, as an Options seller, respect the upside more than the downside. It's the main reason why most Options sellers blow legions of dead presidents.

Recent Trading Activity

- Closed Call side of RUT 1180/1190/121/1390/1400 Elephant  on Tuesday for a $310 loss. The pussification of my soul. No justification for this behavior when the Elephant (God's greatest invention after lesbian sex and Instagram) has been designed for unstoppable up moves. I closed this Call side as soon as the market retraced a bit, which was unnecessary, and also not really in line with the plan, as I had mentioned during the weekend analysis, that I would be closing on a break even balance. But, c'est la vie.

- Initiated a January RUT 1170/1180/1410/1420 Unbalanced Iron Condor on Thursday for $2,650 credit. I wanted to trade SPX instead but the credits were too miserable.

Market Conditions 
(Click on image to enlarge)
Stochastics: 29 (neutral)
McClellan: +6 (neutral)
Stocks above their 20 DMA: 61% (neutral)

Russell and my two positions (yellow lines):
(Click on image to enlarge)
Still a little too far from the main moving averages.

Current Portfolio

DEC30 SPX 1990/2000/2270/2280 Unbalanced Iron Condor
$2,360 credit. 4 weeks to expiration. Put side safe at only 5 deltas. Call side looking good too at just 9 deltas. $1,172 in open profits at the moment.

DEC30 RUT 1180/1190 Credit Put spread
Remainder of what was originally a Lazy Elephant. 4 weeks to exp. $700 credit. Looking safe for now at just 6 deltas.

DEC30 IWM Long 121 Puts
Also part of what was originally a Lazy Elephant. Only $160 debit invested here so no concerns. For now it is just a partial hedge for the position mentioned above. Will close it whenever I decide to close the DEC30 RUT 1180/190 Credit Put spread.

DEC30 RUT 1410/1420 Credit Call spread
$900 credit. 4 weeks to expiration as well. Just 3 deltas. No concerns at all here. This one is now forming an Iron Condor with the DEC30 RUT 1180/1190 CPS mentioned earlier:

(Click on image to enlarge)
The resulting 1180/1190/1410/1420 Iron Condor is looking great, showing $1,000 of open profits which is more than enough to eclipse this week's $310 loss on the closed Call side of the Elephant.

JAN RUT 1170/1180/1410/1420 Unbalanced Iron Condor
$2,650 credit. Initiated 48 hours ago. No threats and lots of baby-sitting time ahead.

Action Plan for the Week

All our positions are looking great at the moment. However, there is some risk concentration to be aware of and it is wise to mitigate it. Right now I basically have 3 Iron Condors in play, two in DEC30 and one in JAN. The adjustment point for both RUT Iron Condors is 1,235 and this is not good. They should ideally have different adjustment points along the spectrum of prices (Hence why I wanted a JAN SPX trade instead of RUT. Bastards). Having to adjust two positions at the same time on the same index is just too nightmarish. For this reason, I will be closing one of them, in this case the DEC30 one which has made some decent profits already. I may wait a little bit to get some more time decay especially if the markets start the week in green territory, in that case I will be closing it late in the week. The up moves make me feel more confident in this case as 1,410 seems really out of reach on the charts, and the concentrated risk is to the downside. Adjustment points to the upside are quite different (1,390 for DEC30 position vs 1,370 for JAN position) so there is some risk diversification there, unlike the Put sides.

- I'll defend the SPX 1990/2000/2270/2280 Unbalanced Iron Condor if SPX hits 2,245 or so. I'd be closing the 2270/2280 side for a loss and deploying a new spread around 2,310. I think this scenario is very unlikely this week. I may also be inclined to take a $600 - $700 gain from the 2270/2280 Call side if SPX visits the 2,160 - 2,170 range.

- Other than that, no new positions until the markets reach an extreme, in which case it will be an SPX spread using January 2017 options. With the FED's Rate decision in 11 days, I think we may get a whole lot of nothingness until there. So, a price extreme scenario is unlikely in my view for the next few days.

The LT Trend Sniper system closed the short EURUSD trade for a 3.06% portfolio gain. It was a nice 182 pip winner held for 16 days. 

The robot is still short Gold:
The Stop Loss (red line) has been trailed even more and there is now a guaranteed gain in the position (green line represents the short entry level).

The Sniper will exit the position at the close on Thursday if until then price doesn't close lower than this past Thursday's close at least once. Otherwise, one more week riding the short bet.

The Sniper system is now down only 1.88% for the year (Euro and Gold). This is without taking into account the Gold short trade that is still in play. Apparently, the system will finish 2016 in positive territory. Not a great performance by any means this year, but if it ends up showing gains for the third year in a row, that would be cool.

Economic Calendar

Monday: ISM Non-Manufacturing PMI and Employment
Wednesday: JOLTs Job Openings and Crude Oil Inventories.
Thursday: China's CPI and PPI

Options Trading results: +8.68% for the year (S&P benchmark: +7.24%)
                                         Portfolio 40% invested, 60% cash.

Take it easy, but take it anyways. Good luck!

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.

Check out 2016 Track Record

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