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BookingAlpha Option Trading Advisory

Saturday, June 24, 2017

Weekend Portfolio Analysis (June 24, 2017)

This week's analysis has been published at

Download Weekend Portfolio Analysis (2017-06-24).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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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 now available: Weekend Portfolio Analysis (June 17, 2017) 
Recent Trading Activity

- Initiated an August SPX 2260/2270/2520/2530 Unbalanced Iron Condor on Thursday. Net Credit $1,500. The reason for the small total credit is that the position was initiated with only a 4 to 1 ratio of Put spreads to Call spreads. The adjustment point on the Call side for this position, initially would have been SPX 2,480. That number, as you know, moves up over time. But initially, that is roughly the SPX spot at which the short 2520 Calls would be reaching 30 deltas and triggering my adjustment decision. Well, SPX 2,480 happens to be uncomfortably close to the SPX 2,475 that I have established as the defense line for the July SPX Unbalanced Iron Condor. By playing a 4:1 ratio with the August position, the Call side adjustment can be delayed much further (~45 deltas, instead of 30). Up to around SPX 2,515. This provides us with better risk diversification across the spectrum of SPX prices.

Market Conditions
(Click on image to enlarge)
Stochastics: 50 (Neutral. Down from 61 last week)
McClellan: -7 (Neutral. Down from +4 last week)
Stocks above their 20 DMA: 53% (Neutral. Down from 55% last week)

No man's land (as usual in 2017).

Oscillators lower for the third week in a row. Yet prices have barely moved. I'm still looking at that thinner red line in the middle as potential support in the long-term uptrend (SPX 2,400 - 2,415) for this week. That would be an interesting spot to deploy out of the money Credit Put spreads with some increased volatility (VIX currently at 10.02 but would increase if SPX went there this week).

The Russell 2000:
(Click on image to enlarge)
Nice rebound this week, which was great as I was starting to get a little worried with RUT weakness. Our July Unbalanced Lazy Elephant now starting to look much better. Still looking at potential resistance for RUT at 1440, a number that is far from causing us harm.

Current Portfolio

JUL SPX 2250/2260/2490/2500 Unbalanced Iron Condor
hedged to the upside with SPY 249 Calls
4 weeks to expiration. Net credit: $1,540.

(Click on image to enlarge)

Adjustment point to the downside: 2,315 (Close Put spread for a loss, deploy new spread at the 10 delta level).
Defense point to the upside: 2,475 (Close Credit Call spreads at a loss, close SPY long 249 Calls for gains and deploy new farther out of the money Credit Call spreads, at the new 10-delta mark).

The Call spreads are now at 9 deltas and showing profits for the first time. The long SPY 249 Calls, purchased as upside hedge are showing a loss. Overall, combining both things, the Call side is showing a small loss at the moment (less than $300). This is the disadvantage of investing in a hedge. But hey, no regrets. It played an important role at its time and provided peace of mind to our capital preservation instincts.

JUL RUT/IWM 1310/1320/1500/1510/134/151 Unbalanced Elephant
Net Credit: $1,417. Four weeks to expiration.

Looking great overall and far from imminent danger.
(Click on image to enlarge)
Defense lines: 1,360 to the downside (adjust the Credit Put spread to the new 10-delta strike price), 1,465 to the upside (close all the Call options for a loss, no adjustments, just keep riding the Credit PUT spreads side). The T+0 line should start to accelerate upwards nicely this week.

AUG SPX 2260/2270/2520/2530 Unbalanced Iron Condor
Net Credit: $1,500 and 8 weeks to expiration. Far from trouble and lots of baby-sitting ahead.

Action Plan for the Week

- If SPX reaches 2,475 I'll close the Call side of July SPX Unbalanced Iron Condor. Also take the gains from the SPY 249 long Call hedges. Deploy new Credit Call spreads in the SPX 2,525 area. If the new spread is hard to get filled, or a credit better than 0.90 (10 point wide spread) is not possible, then I'll go very far out to SPX 2,580 with September expiration. So, it'd be the 2,580/2590 Credit Call spread.

- Regarding the same July SPX Unbalanced Iron Condor, if a combined break-even result can be obtained from the combination of the 2490/2500 Credit Call spreads and the SPY 249 Long Calls, I'll be closing both. Happy at this point with a scratch there and then ride the 2250/2260 Put side to oblivion for sweet profits.

- Also, if the entire July SPX Unbalanced Iron Condor can be closed for 0.55 debit (75% of max profit), I'll be pulling the trigger. That would be a $1,600 profit on the Iron Condor. In this scenario, I'd be closing the long SPY 249 Call hedges at a smaller loss, thus removing it all from the inventory with an overall positive result.

- Adjust Put side of July RUT Unbalanced Elephant if the index falls to roughly 1,360. I'd be taking the 1320/1310 Credit Put spreads off the table at a loss and deploying new ones around 1,250 or lower (the presumed new 10-delta mark). To the upside, close all the Call options of the Elephant on a RUT trip to 1,465. No adjustments. The loss would be smaller than the Credit collected from the Put side. I believe this latter scenario is unlikely, but I'm just throwing out the risk management plan anyways.

- As for new positions, no plan to add anything new for now. Unless we suddenly reach a short term oversold condition, in which case an August RUT Credit Put spread at 10 deltas would be my go to move.

Economic Calendar

Monday: German Climate Index. US Core Durable Goods Orders.
Tuesday: US Consumer Confidence.
Wednesday: Pending Home Sales. Crude Oil Inventories.
Thursday: US GDP. China's Manufacturing PMI.

Good luck this week my friends,

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Check out 2017 Track Record

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