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BookingAlpha Option Trading Advisory

Saturday, December 9, 2017

Weekend Portfolio Analysis (December 9, 2017)

This week's analysis has been published at

Download Weekend Portfolio Analysis (2017-12-09).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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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 2017 Track Record page and the 2018 Track Record page

Last Weekend Analysis now publicly available: Weekend Portfolio Analysis (December 2, 2017) 
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Recent Trading Activity

- Initiated a January RUT/IWM Unbalanced Lazy Elephant on Thursday. Net credit: $1,448.

Market Conditions
(Click on image to enlarge)
Stochastics: 58 (Neutral. Down from 83 last week)
McClellan: +18 (Neutral. Down from +53 last week)
Stocks above their 20 DMA: 55% (Neutral. Down from 67% last week)

No man's land.

The strong bid supporting this market continues. I have also learned to never get overly bearish into year end. We are back near all-time highs. This time with oscillators far from overbought territory. So, there is some room to run. That said, the upper end of the long-term uptrend channel should offer decent resistance on the way up, pointing to a maximum high of around 2,673 for the upcoming week. Even that number would not hurt our current SPX positions.

VIX at a minuscule 9.58. Tax Cuts, a done deal. The Fed is apparently increasing rates this week. Suddenly the focus shifts to the national debt ceiling debate and possible government shutdown. We've seen for months that every dip is bought aggressively. Evidently that will end one day, but Christmas 2017 may not be it. I have adopted a more bullish stance into year end with elevated Put side exposure that is not common in my trading.

The Russell:
(Click on image to enlarge)
RUT now looking weaker than SPX and with more upside room to run. Positions looking good here.

Current Portfolio

DEC SPX 2390/2400/2690/2695 Unbalanced Iron Condor
with additional DEC SPX 2525/2520 Credit Put spread
Net credit: $1,750. Expiring this Friday. No concerns with the Put side. The Call side may still give us small headaches.
(Click on image to enlarge)
Defense lines: 2,530 to the downside (adjust 2525/2520 Put spread) and 2,685 to the upside (adjust Call side). The adjustments would be deployed in a different expiration cycle. Either Dec29 or Jan19. More conservative traders can simply close the 2690/2695 for gains on Monday and forget about it. Then let the Put sides expire for max on Friday. Probably what I'll do.

DEC RUT 1370/1380/1570/1580 Unbalanced Iron Condor
with addition of  Long IWM 157 Calls and RUT 1450/1445 Credit Put spread
Net credit: $1,715. Expires on Friday. No more concerns here.
(Click on image to enlarge)
Defense lines: 1,455 to the downside (adjust 1545/1540 Credit Put spread) and 1,565 to the upside (adjust Call side). The adjustment would be deployed on the Dec29 or Jan19 cycles. I intend to let it all expire this week.

DEC29 RUT 1410/1420/1590/1600 Iron Condor
A small $785 credit and three weeks to expiration. I'm not too concerned here due to the small position size. If a Call side adjustment is necessary I feel confident with deploying a larger number of contracts in this case.
(Click on image to enlarge)
Defense line: 1,425 (adjust Put side) and 1585 (adjust Call side). Chances are very small that anything will need to be done here this week.

Jan. SPX 2440/2450/2685/2695 Unbalanced Iron Condor
with additional Long SPY 269 Calls and 2480/2475 Credit Put spreads
Net credit: $1,649. Six weeks to expiration. The Call side is now hedged, so concerns on that end decrease.
(Click on image to enlarge)
Defense lines: 2,510 (adjust 2450/2440 Put spread). Then comes 2,485 (adjust the small 2480/2475 Put spread). On the upside it is still 2,680 (adjust the 2685/2695 Call side).

Jan. RUT/IWM 1380/1390/1605/1610/161 Unbalanced Elephant
Net credit: $1,448. Six weeks to expiration.
(Click on image to enlarge)
Nice flat T+0 (pink line) on the way up.
Defense lines: 1,440 (adjust Put side) and 1,570 (close the Call side at a small loss, keep riding the Put side, whose gains will more than cover the hypothetical Calls' losses).

Action Plan for the Week

- If S&P futures are not drastically up on Monday morning at the open and the DEC15  2690/2695 Call spread is showing a nice gain, I will seriously consider taking it off the table. Even though I don't think SPX will get near 2685 this week, I just want peace of mind at this point of the year and not have to adjust a position during expiration week after so much battling. The spread was initiated at 0.50 credit and it is now priced at 0.20. So, there is a decent gain there. Of course this may change if markets are suddenly up by a lot on Monday morning. In that case I will just keep riding it, expecting SPX to not hit 2,685 during the week.

- I'll adjust the DEC15 RUT 1570/1580 Credit Call spread if RUT gets near 1,565. I'm willing to deploy a greater number of contracts. No additional margin consumed. I'd be taking off the long IWM Calls for profits in this case, along with one of the Credit Put spreads in this position. This scenrio is unlikely.

- I'll adjust the DEC29 RUT 1590/1600 Credit Call spread if RUT gets near 1585. I'm also willing to increase the number of contracts here. This is also an unlikely scenario.

- I'll adjust the JAN SPX 2685/2695 if SPX gets near 2,670. I have been using 2,680 all this time (5 point distance to the short strike of the call spread). However, reaching 2670 with more than a month to expiration means that those other 10 points are almost a given. So, instead of taking a larger loss, I would just take the loss then and there. I'd be taking the long SPY 269 Calls off for gains in this case, along with one of the Credit Put spreads in this position. I'd be deploying new Call spreads around SPX 2740, quite possibly increasing the number of contracts. Even with the loss, the position would be a net winner in the end, as I don't think the market will reach that level by January expiration.

The Sniper robot went short Gold on Friday.
Current gold price is right around the entry price. Red line higher depicting the Stop Loss level. We'll see how this one goes.

Sniper's results tracked here.

Economic Calendar
Tuesday: German ZEW Economic Sentiment. US PPI and Federal Budget Balance.
Wednesday: US CPI. FOMC Statement. Chinese Industrial Production.
Thursday: German Manufacturing. US Core Retail Sales.
Friday:  US Industrial Production.

Good luck this week my friends. Trade with confidence.

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