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Sunday, December 31, 2017

Weekend Portfolio Analysis (December 31, 2017)

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

Download Weekend Portfolio Analysis (2017-12-31).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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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 2018 Track Record page


Last Weekend Analysis now publicly available: Weekend Portfolio Analysis (December 23, 2017) 
The 2018 Options Trading Plan is now available at LTOptions. If the link doesn't work, simply log in to LTOptions.com and you'll see it right after logging in.


Recent Trading Activity

- Dec29 RUT Iron Condor expired for a $785 gain on Friday. This is the last 2017 position. Our performance for the year was +20.27% for the overall Portfolio. I will be writing a separate article on my thoughts and reflections which will be published over the next few days.

Market Conditions
(Click on image to enlarge)
Stochastics: 42 (Neutral. Down from 71 last week)
McClellan: +21 (Neutral. Up from +16 last week)
Stocks above their 20 DMA: 53% (Neutral. Down from 58% last week)

No man's land.

Still relatively close to long-term resistance (diagonal red line). SPX now at a less extreme 2% higher than its 50-day average. VIX spiked up a little now at 11.04.  As usual, this is not the ideal condition to deploy individual Credit Spreads on one side of the market. The oscillators are pointing to some short-term weakness. Activity should start to pick up little by little next week. Remember that the markets will be closed on Monday. So, it will be a shortened week.

The Russell:
(Click on image to enlarge)
Similar price action recently to that of the SPX.


Current Portfolio

Jan. SPX 2440/2450/2745/2750 Unbalanced Iron Condor
with additional 2480/2475 Credit Put spreads
Net credit: $2,050. Three weeks to expiration.
(Click on image to enlarge)
Defense lines: 2,505 (adjust 2450/2440 Put spread). Then comes 2,485 (adjust the small 2480/2475 Put spread). On the upside I'll wait until 2,740 to adjust the Call side.


Jan. RUT/IWM 1380/1390/1605/1610/161 Unbalanced Elephant
Net credit: $1,448. Three weeks to expiration.
(Click on image to enlarge)
Defense lines: 1,425 (adjust Put side) and 1,580 (close the Call side at a small loss, keep riding the Put side, whose gains will more than cover the hypothetical Calls' losses).


Feb. SPX 2520/2525/2780/2785 Unbalanced Iron Condor
Net credit: $1,900. Seven weeks to expiration.
(Click on image to enlarge)
Defense lines: 2,600 (adjust 2525/2520 Put spread) and 2,740 (adjust the 2780/2785 Call side).
There is risk concentration on SPX 2,740. A price where I would be defending two positions. As I mentioned last week, this is generally undesired. I'm going to take the risk again this week as a 2,740 SPX price for only 4 trading sessions seems very unlikely.


Action Plan for the Week

- Just baby-sit existing positions. They all look very safe by now. I'll adjust at the levels mentioned above for each position but I think chances are high that it won't be necessary.

- Initiate the second position of the February monthly expiration cycle (Third Friday of the month).

 . If we reach an oversold condition, I'll deploy a RUT Credit PUT Spread as soon as the condition takes place. In other words, without necessarily waiting until Friday. 

 . If we stay in No man's land territory, I'll deploy an Unbalanced Elephant. The following is my candidate, but as usual, remember that strike prices in all likelihood will vary as the market moves.

RUT Strike Prices: 1395/1405/1615/1625
Number of Contracts: 20/20/8/8

IWM Unbalanced Long Strangle: 143/162 with 2 and 15 contracts respectively

This is how it would look

For those with smaller accounts, you can play the same RUT strikes, number of contracts 2/2/2/2 and then hedge with 5 long IWM Calls, same strike price, resulting in a similar risk/reward profile.

For more details on the Lazy Elephant strategy as well as its adaptations to make it small-account friendly, consult the guide here.


Economic Calendar
Monday: Markets closed for New Year.
Tuesday: Europe and US manufacturing.
Wednesday: ISM Manufacturing Employment.
Thursday: ADP Non-Farm Employment change
Friday: Europe CPI. US Non-Farm Payrolls, Unemployment Change, ISM Non-Manufacturing.

Happy New Year! LT


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Check out 2017 Track Record

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