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BookingAlpha Option Trading Advisory

Saturday, February 25, 2017

Weekend Portfolio Analysis (February 25, 2017)

This week's analysis has been published at

Download Weekend Portfolio Analysis (2017-02-25).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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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 (February 19, 2017) 
Recent Trading Activity

- Added 2400 strike price Long Calls to the March SPX Unbalanced IC as an upside hedge on Tuesday. Basically giving away most of my potential gains from the 2400/2410 Credit Call spread side in exchange for reduced upside risk. Because I was short 2400 strike Calls already, the Calls purchased this week only reduce my short exposure. So, the current position now is as follows, in terms of number of contracts: 20/20/13/15  (from 20/20/15/15 previously).

- Initiated an April SPX 2175/2180/2455/2460 Unbalanced Iron Condor position on Friday. I made a mistake specifying the credit in my limit order. I could have done better. It is a small, worth sharing lesson. Details here.

Market Conditions

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Stochastics: 94 (overbought)
McClellan: +10 (neutral)
Stocks above their 20 DMA: 58% (neutral)

No man's land.

Both McClellan and the % of Stocks above their 20 DMA suggest there is some room to keep going up. The upper end channel however, suggests this room will quickly be limited.

February has been a very challenging month for options sellers with a permanent vertical rally and extremely low volatility. These are the difficult moments to navigate and the ones that make you question the viability of Options Selling strategies overall. One thing I like to do is to permanently own some established dividend paying companies and to that mix you can add SPY or VYM shares to take advantage of the historical upside bias of the markets and mitigate anxiety in times like this. No single strategy is the Holy Grail and Options Selling is not the exception. It can be frustrating at times, just like holding the S&P 500 was for more than a decade until as recently as 2011. But a good mix of strategies with a long term positive edge can be healthy: When the markets stay sideways, or decline, the Options Selling portion of our arsenal can and should be mitigating the decline suffered by our passive long term holdings.

Back to Options Selling. With two March positions and one April position I am not interested in adding anything at the moment, unless we get to oversold territory which sounds like heresy nowadays.

The Russell 2000:
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Current Portfolio

MAR SPX 2090/2100/2400/2410 Unbalanced Iron Condor hedged with SPY 214 Put
Max potential profit is now $1,219. Number of contracts is 20/20/13/15. 3 weeks to expiration.

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The Put side is safe by now. We can say it will be a winner. The Call side however is not out of the woods yet. SPX 2,385 is my decision point to take the Call portion off at a loss (another one). If an adjustment becomes necessary this week, I will probably go to April SPX 2480, or perhaps even farther out to May SPX 2520 or something like that. I'll still give my chance the chance to be right, so I won't be doing anything until SPX 2,385.

MAR RUT/IWM 1235/1245/1450/1460/127/146 Unbalanced Elephant
$1,480 net credit. 3 weeks to expiration. This one will be a winner. We only need to know by how much, but definitely a winner.

(Click on image to enlarge)
RUT 1420 is still the point to take the Call side off at a small loss and just ride the Put side to compensate for it and end up with a winner overall in the end. On the other hand, if RUT doesn't hit 1420 by expiration our winner will be much bigger ($1,480 max credit collected). There is an $800+ open gain at the moment in the position. Given recent calamities I feel tempted to take this winner off the table, but I said I would be more aggressive this year, so, I'm going to wait. Worst case scenario is this gain becomes $500, best case scenario it grows a lot more to $1,480. So, no pressure to prematurely close anything here.

APR SPX 2175/2180/2455/2460 Unbalanced Iron Condor
Yesterday's trade. 8 weeks to expiration, $2000 credit collected and lots of baby-sitting ahead. No immediate threats.

(Click on image to enlarge)

Action Plan for the Week

- If SPX hits 2385 this week, I will be taking the Call side of the March Iron Condor off the table. I'll be selling a May 2520/2530 Call spread in that case, and if the fill becomes impossible then an April Call spread around 2,480. On the other hand if SPX declines to about 2,310 I will be closing all those problematic Call contracts for about break-even or a small loss.

- Defend the March RUT Unbalanced Elephant position in case the index reaches 1,420 by just closing the Call side at a small loss. This would result in a winner overall come March expiration thanks to the gains from the Put side. Nothing to do if RUT stays below 1420.

- Enter a RUT Credit Put spread if we reach an oversold condition. Perhaps a 4% decline or so. Otherwise, wait until end of next week to enter an Unbalanced Elephant with April options.

Economic Calendar

Monday: Core Durable Goods. Pending Home Sales.
Tuesday: GDP, Consumer Confidence. President Trump speaks. 
Wednesday: ISM Manufacturing PMI, Employment and Crude Oil Inventories.
Thursday: Europe's CPI and Unemployment
Friday: ISM Non-Manufacturing PMI and ISM Non-Manufacturing Unemployment.

Good luck this week folks,

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 2017 Track Record

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