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Saturday, November 4, 2017

Weekend Portfolio Analysis (November 4, 2017)

This week's analysis has been published at LTOptions.com

Download Weekend Portfolio Analysis (2017-11-04).pdf

If the above link doesn't work for you, simply log in to LTOptions.com, 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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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


Last Weekend Analysis now publicly available: Weekend Portfolio Analysis (October 28, 2017) 
Recent Trading Activity

- Initiated a December RUT Unbalanced Iron Condor on Thursday for a $1,600 credit.


Market Conditions
(Click on image to enlarge)
Stochastics: 86 (Overbought. Up from 60 last week)
McClellan: -68 (Neutral. Up from -84 last week)
Stocks above their 20 DMA: 46% (Neutral. Down from 49% last week)

No man's land.

Price, yet again, higher than last week. The number of stocks trading above their respective 20-day average went down despite the higher index price, suggesting less participation. This is still however, no man's land, which to me means, price has enough room to go either way and it is risky to sell individual credit spreads on one side of the market.

With the Fed Meeting behind and the Unemployment report, there are small chances of a crash at the time. At least the way I see it, unless something truly unexpected happens. Seems that the next serious correction will not happen after choreographed news in the Economic Calendar that the market seems to be pricing-in in advance. Current VIX reading: 9.14. Had we waited for higher VIX readings this year, we would have made no money and stayed in cash almost the entire year. A lesson that the actual VIX value is not as relevant as the relationship between the Implied Volatility and what ends up being Realized. As long as Realized volatility is smaller than what was previously Implied, we are bound to make money.

The index is +2.6% higher than its own 50-day average, and based on the upper end of the uptrend channel 2,607 should be the ceiling for the upcoming week. Meaning, that, or less than that.


The Russell:
(Click on image to enlarge)
Still moving sideways, which is nice for us. Yellow lines as usual representing my current positions, aka where I don't want the market to go. RUT is now only 2.1% higher than its 50-day average. So, the recent price compression may be getting to an end. I'm leaving the superior red line as our guideline for potential support.


Current Portfolio

NOV SPX 2315/2325 Credit Put spread
Net Credit of $1,000. Two weeks to expiration. The remainder of what used to be an Unbalanced Iron Condor. Looking great.
(Click on image to enlarge)
Defense lines: 2,370 (adjust Put side). Very far down. Nothing to do. The entire profit has been made and you can close this trade if you want. The only problem is liquidity at this point, trying to get filled on a closing order for this spread may become a challenge and you may have to give up a few cents. I'll just ride it to expiration.


NOV SPX 2425/2420 Credit Put spread
Net Credit $250. Two weeks to expiration. Small position of ten 5-point wide spreads.
(Click on image to enlarge)
Because of the small size (only one fourth the typical size), we can afford to delay the adjustment until SPX 2,430. With SPX at 2,587 I have no concerns here.


NOV RUT 1380/1390/1580/1590 Unbalanced Iron Condor
Net credit: $1,555. Two weeks to expiration. Very safe at this point.
(Click on image to enlarge)
Defense lines: 1,420 to the downside (adjust Put spread) and 1,575 to the upside (adjust Call spread). Both price points are unlikely for the upcoming week. Still a very healthy position that has enjoyed RUT's sideways price action. It is not a bad idea to close it right now. I will personally try to maximize all this winners into year end for that small performance boost.


DEC SPX 2390/2400/2635/2640 Unbalanced Iron Condor
Net credit: $1,555. Six weeks to expiration. The Call side still taking a little heat although the threat is not imminent.
(Click on image to enlarge)
Defense lines: 2,465 to the downside (adjust Put side) and 2,630 to the upside (adjust Call side).


DEC RUT 1370/1380/1570/1580 Unbalanced Iron Condor
Net credit: $1,555. Six weeks to expiration. The position entered two days ago. No concerns for now and lots of baby-sitting ahead.
(Click on image to enlarge)
Defense lines: 1,430 to the downside (adjust Put side) and 1,565 to the upside (adjust Call side).




Action Plan for the Week

- Every single one of the November positions look very safe, almost like sure winners at this point. We should have a profitable and stress free expiration Friday two weeks from now.

- The focus of the attention is still the December SPX Unbalanced Iron Condor, in particular its Call side. Same action plan as last week:
The Call spread is at the 21-delta mark. With a 15-point SPX rally, it will reach 30 deltas. If you are tired of suffering this year with the Call side, you can simply close the 2635/2640 spreads for 1.70 debit or so at that point. With an initial credit of 0.50, that would be a 1.20 loss per spread or $600 bucks in my case. That loss is more than compensated by the credit from Put side. So, in the end, the position would be a winner anyways and no more Call side headaches.

Given that the Call side is small (only a 4 to 1 ratio of Puts to Calls), I'm willing to wait longer before taking a loss on the 2635/2640 Call spread. My plan for now: if the 2635 strike Calls reach 31 or 32 deltas, I will go ahead and sell a Credit Put spread, probably around SPX 2,470. It will be one fourth the usual capital deployed on Put spreads. So, in my case of a $100,000 portfolio, I would be playing five 10-point wide spreads (0.50 credit or better per spread), or ten 5-point wide spreads (0.25 credit or better). In addition to this move, I'll also be seriously considering a December SPX 2675/2680 Credit Call spread or 2675/2685. Also a small size (10 five-point wide spreads or five 10-point side spreads). This new Call spread would only be adjusted if SPX reaches 2,670 which looks safe enough. With these new credits, I would be willing to close the existing 2635/2640 spread at a loss right then and there, or at a smaller loss on a quick/small market decline.



Forex
As anticipated, the LT Trend Sniper system went short the EURUSD
(Click on image to enlarge)
The green line represents the entry level. As you can see the trade is about break-even and not much progress has been made. The Sniper will exit the trade late this week (Thursday or Friday) if sideways action persists and the price of the Euro stays above the short entry level.

FX Results tracked here.



Economic Calendar

Nothing of interest this week in the Economic Calendar.
You can always check it out yourself if you want through this link.

Take it easy folks,
LT


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Check out 2017 Track Record


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