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BookingAlpha Option Trading Advisory

Saturday, March 25, 2017

Weekend Portfolio Analysis (March 25, 2017)

This week's analysis has been published at

Download Weekend Portfolio Analysis (2017-03-25).pdf

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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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

Last Weekend Analysis: Weekend Portfolio Analysis (March 18, 2017) 
Recent Trading Activity

- 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.

Market Conditions

(Click on image to enlarge)
Stochastics: 27 (neutral)
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:
(Click on image to enlarge)

Current Portfolio

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.
Defense lines set around $1,315 to the downside (adjust Credit Put spread) and $1,425 to the upside (close Call side for small loss and ride the Put side to expiration to obtain an overall net gain despite the Call loss).

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.

Economic Calendar

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

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