LTOptions at a 33% discount during the Year End Holidays.
Tell me More

BookingAlpha Option Trading Advisory

Saturday, February 4, 2017

Weekend Portfolio Analysis (February 4, 2017)

This week's analysis has been published at

Download Weekend Portfolio Analysis (2017-02-04).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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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 28, 2017) 
Recent Trading Activity

- Closed FEB SPX Unbalanced Elephant for a $1,050 gain on Friday. We are now completely done with the February expiration cycle.

- Initiated a MAR RUT/IWM 1235/1245/1450/1460/127/146 Unbalanced Elephant position on Friday for a net credit of $1,480.

Market Conditions 
(Click on image to enlarge)
Stochastics: 60 (neutral)
McClellan: +53 (neutral)
Stocks above their 20 DMA: 61% (neutral)

No man's land.
And with a very low VIX at 10.97 it is time for me to slow down. A new March position was entered yesterday and there are now two positions working in the portfolio. Both in the March expiration cycle. Portfolio about 34% invested and I'm in no rush to add anything new, unless we reach an oversold condition, or until we peacefully get to 8 weeks before the April monthly options expiration cycle.

SPX ceiling for last week was estimated at 2,313. And it was a good bet. The market didn't get even close to that number. My estimated ceiling this week is 2,317 just using the upper end of the channel.

After entering the Elephant position yesterday a reader asked whether with it, I was making a bet that volatility would go even lower, given how low it already is. It is hard to picture volatility going much lower than this. But at the same time we don't want excessive amounts of cash sitting idle. Volatility is mean-reverting and of course at some point it will go up, but nobody knows when. This reminds me of the February - August 2015 period where the SPX was trapped in a 4.6% range (2040-2135). Six months of back and forth and low volatility. Not playing at all during half a year would have meant zero returns, waiting for volatility to pick up. So, in my world, you just keep playing. Only perhaps being more conservative and investing in some long Vega hedges for the inevitable spike. The investment in those hedges (long IWM and SPY Puts and Calls, but mainly Puts) will eat into the credits we collect, so our returns will decrease. But, it is simply the byproduct of playing smart and being conservative during the unfavorable environments.

(Click on image to enlarge)
Yellow  horizontal lines representing my positions. i.e. where I don't want the markets to go.

Current Portfolio

MAR SPX 2090/2100/2360/2370 Unbalanced Iron Condor hedged with SPY 214 Put
$1,974 net credit (when subtracting the debit invested in the SPY Put). 6 weeks to expiration. 6 deltas on the Put side and 16 deltas on the Call side (both sizes down in delta since last weekend):

(Click on image to enlarge)
Adjustment point on the way up around 2,330. We don't have the February Elephant in play anymore, so no more risk concentration in that respect.

Looking at the upper end of the uptrend channel, it points to a high of 2,317 by Friday. Even, in that hypothetically bullish scenario, this position would not be reaching the Call side adjustment point that I have established around 2,330. We will still plan for it, but in my view we won't see 2,330 in the next few days.

On the way down the adjustment point still lies at SPX 2,170. That's an unlikely price move for a week of 5.5% in the S&P.

MAR RUT/IWM 1235/1245/1450/1460/127/146 Unbalanced Elephant
Position entered just 24 hours ago. Lots of baby sitting ahead and nothing new to add.

(Click on image to enlarge)

Action Plan for the Week

- Defend the March SPX Unbalanced Iron Condor if the index reaches 2,170 (Put side adjustment. Unlikely) or 2,330 (Call side adjustment to around SPX 2,400 where it should be safe without hassle).

- Defend the March RUT Unbalanced Elephant position in case the index reaches 1,295 (Put side adjustment. This is a 5.95% fall in a week for Russell. Unlikely) or 1,415 (just close Call side for a small loss and ride the Put side).
- For the next 3 weeks I will be waiting for an oversold condition in order to sell Credit Put spreads with March expiration. If such conditions do not materialize, then it will be a waiting game until April expiration is 8 weeks away, and then I will plan a new Unbalanced Iron Condor.

Economic Calendar

Wednesday: US Crude Oil Inventories
Michigan Consumer Sentiment. Federal Budget Balance

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

Go to the bottom of this page in order to see the Legal Stuff

No comments:

Post a Comment