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Saturday, January 14, 2017

Weekend Portfolio Analysis (January 14, 2017)

This week's analysis has been published at

Download Weekend Portfolio Analysis (2017-01-14).pdf

If the above link doesn't work for you, simply log in to, navigate to the "Weekly Analysis" tab and download the document from there.

The Weekend Portfolio Analysis will be available on this site next week for historical reference.

All currently open positions can be seen on the Track Record page

Related Article: Weekend Portfolio Analysis (January 7, 2017) 
During the "Trump rally" I argued that the indexes had gone too far above their main moving averages. As dumb as it looked to say anything different from "we're going to the moon", the reality is that indexes such as the SPX can rarely stay 4% higher than its 50-day moving average for weeks. 3.5% higher than its 50-day starts to become a stretch. The Russell can overshoot a little bit more than SPX. It is after all a different animal. 6% - 8% higher than its 50-day average does happen in RUT. But also, not sustainable in the long run. We haven't had a market decline, but the sudden rally of December has stalled and it is being digested, for now via time at least. Both RUT and SPX are now much closer to their main moving averages. The two Credit Call spread positions of the January expiration cycle are winning trades by now and should expire this upcoming Friday without hassle of any sort, as psychologically hard as it was to put them on during the Trump rally.

Recent Trading Activity

- No activity

Market Conditions 
(Click on image to enlarge)
Stochastics: 76 (neutral)
McClellan: +50 (neutral)
Stocks above their 20 DMA: 57% (neutral)

No man's land.
Plenty of room both ways but we are still closer to the upper end of the channel, so, to me, an SPX 2300 ceiling this week is reasonable and more than that would be unexpected. That would be the upper boundary of the channel.

VIX at 11 point something, making every active options seller feel guilty about his life choices. In times like this, it is better to play either smaller sizes, or at least add some long Vega exposure even if it partially eats into the premiums collected. Volatility is only bound to pick up pace at some point.

(Click on image to enlarge)
As usual, yellow lines depicting my positions in both cases.

Current Portfolio

JAN RUT 1480/1490 Credit Call Spread
$1,200 credit. 1 week to expiration. With RUT at 1,372 this is going to be a winner.

JAN SPX 2370/2375 Credit Call Spread
$1,600 credit. 1 week to expiration. Will be a full winner this Friday.

FEB RUT 1200/1210/1470/1480 Unbalanced Iron Condor hedged with IWM 126 Puts
$1,874 credit (when subtracting the debit invested in the IWM Puts). 5 weeks to expiration. 5 deltas on the Put side, 6 deltas on the Call side.
Adjustment points now at 1,260 and 1,440. No problems for the upcoming week.

FEB SPX/SPY 2115/2125/2350/2360/216/236 Unbalanced Elephant
$1,294 net credit and also 5 weeks to expiration. No concerns at the moment
Put adjustment at 2,185 this week.

On the way up 2,320 is still the point to take small loss on Call side and forget about it, leaving the Put side open in that case to absorb that loss and bring additional gains.

Action Plan for the Week

- Let both JAN Credit Call spreads expire for max profit on Friday morning. This will be a +2.8% portfolio return before commissions and a decent start to the year.

- Defend the RUT Unbalanced Iron Condor if the index reaches 1,260 (Put side adjustment) or 1,440 (Call side adjustment). With RUT at 1,372 this requires significant moves that are unlikely for just 5 trading days. I am also ready to take gains on the Call side if the 1470 strike price suddenly reaches 2-3 deltas. In addition, I have a GTC Order to close the entire position for 0.53 debit (netting a 1.60 gain, 75% of max profit).

- Defend the SPX Unbalanced Elephant if the index reaches 2,185 (Put side adjustment) or 2,320 (just close Call side for a small loss and ride the Put side)

- Enter the first March position by Thursday or Friday. I will probably go with an SPX Unbalanced Iron Condor. My candidate now is 2075/2085/2380/2390, but as usual, those strike prices may change depending on market price action until that day as well as changes in the VIX. If by any chance we reach an oversold extreme, then I will be entering a Credit Put spread instead. As usual around 10 deltas and looking for 0.60 credit or better (10-point wide spread), or 0.30 credit or better (5-point wide spread).

Economic Calendar

Monday: US Markets closed in observance of Martin Luther King Jr Day.
Wednesday: Europe's CPI. US CPI and Core CPI
Thursday: European Central Bank Press Conference. US Crude Oil Inventories, Building Permits, Philly Fed. China's GDP and Industrial Production.

Good luck this week folks,

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Check out 2017 Track Record

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