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Last Weekend Analysis: Weekend Portfolio Analysis (March 18, 2017)
- No activity. I tried to initiate an SPX Unbalanced Iron Condor on Friday (using regular May expiration options, which were 8 weeks out in time) and was not lucky getting filled.
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McClellan: -27 (neutral)
Stocks above their 20 DMA: 37% (neutral)
No man's land.
So, we're neutral but not too far from a short-term oversold extreme. Indeed, it was almost reached this week according to the rules but an afternoon rebound on Wednesday prevented it. I would have love to sell a Credit Put spread. Three months into the year and not a single individual Credit Put spread sold. That's surprising to me, but I didn't want to rush the decision anyway.
In these circumstances, I would normally sell a May Unbalanced Iron Condor, but, given the fact that we are closer to an oversold extreme, I may change my mind this time and go with an Unbalanced SPX Elephant on Monday. So, I'd be trading the Elephant first, and then 6 weeks to expiration I would initiate a May Unbalanced Iron Condor if the market is in a more neutral stage. Just flipping the order for the May expiration cycle folks. The Elephant allows me to have an overall winning position in case of a market rebound that threatens the Call side of the position, so I am going to trade the Elephant first and the Condor later in the May cycle. Of course, this is all assuming we don't reach a short-term oversold condition, in which case the go to play would simply be a Credit Put spread.
VIX at 12.96. Still a very low number, but if we stopped trading we may not make a penny in months. It's been ages since the last VIX > 15 readings and nobody knows for how many more months this can go on.
And here's the Russell 2000, where there is an April Unbalanced Elephant:
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APR SPX 2175/2180 Credit Put spread
Used to be an Iron Condor until the 2455/2460 was taken off the table. $960 credit. 4 weeks to expiration. Very comfortable at the 7-delta mark. No concerns.
APR RUT/IWM 1260/1270/1450/1460/129/146 Unbalanced Elephant
$1,396 net credit, 4 weeks to expiration.
Action Plan for the Week
- Adjust RUT Elephant's Put side if RUT falls to 1,315. Close the Call options is RUT reaches 1,425. This includes the 1450/1460 RUT Credit Call spreads and the IWM Long 146 Calls. Closing it all for a combined loss of $700 would allow us to make money through the Put side and its $1,200 credit, eventually resulting in a net $500 gain. If neither of the levels just mentioned is reached, do nothing.
- If an overbought environment is reached, I'll consider re-establishing the Call side on the April SPX position, making it an Unbalanced Iron Condor again. Ideally, I would like to sell 1470/1480 CCS for 0.90 or better.
- On Monday, I'll enter the first May position. If we have an overnight gap down that happens to put us in an oversold environment I will just go with a May RUT Credit Put spread. Short strike around 10 deltas as usual.
- If we don't see the above scenario, then I will simply go with a May SPX Unbalanced Elephant. The candidate strike prices are, on the Put side 2140/2150 (20 contracts), on the Call side 2450/2460 (8 contracts). That part can be entered as an Unbalanced Iron Condor. Then the long Strangle using SPY options, strike prices 221/246, number of contracts 1 and 12 respectively.
- If we have a big gap up, and I'm talking 15 SPX points or more, then I will just go as usual with the SPX Unbalanced Iron Condor instead of the Elephant described above.
- If I start the week with either an Unbalanced Elephant or an Unbalanced Iron Condor, and then later in the week an oversold condition is reached, I will initiate a May RUT Credit Put spread. Essentially never missing the opportunity to sell Credit Put spreads during oversold conditions.
Tuesday: Goods Trade Balance and Consumer Confidence. Crude Oil Inventories.
Wednesday: Pending Home Sales. Crude Oil Inventories.
Thursday: US GDP. China's Manufacturing and Non-Manufacturing PMI.
Take it easy folks,
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Check out 2017 Track Record