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Saturday, January 20, 2018

Weekend Portfolio Analysis (January 20, 2018)

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

Download Weekend Portfolio Analysis (2018-01-20).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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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 (January 14, 2018) 
Important Note: Some modifications have been made to the 2018 Options Trading Plan. The changes are focused on efficiency and simplicity when defending Credit Call spreads. Log in to LTOptions.com and consult the 2018 Options Trading Plan ebook.


Recent Trading Activity

- Put spreads of January SPX Unbalanced Iron Condor expired for a combined $1,600 profit on Friday.

- Put side of January RUT Elephant expired for a $1,100 gain on Friday.

- Initiated a March RUT Unbalanced Iron Condor position for $1,680 credit on Friday.

We're done with January positions and now shifting the focus to February and March. The January expiration cycle resulted in a 2.85% loss for the portfolio (See Track record page). February positions have also been a challenge. Chances exist that February will also bring negative results. After that the portfolio should be in full recovery mode. We've never suffered three consecutive months of losses and an unprofitable March is very unlikely.

Market Conditions
(Click on image to enlarge)
Stochastics: 93 (Overbought. Down from 95 last week)
McClellan: -11 (Neutral. Down from +54 last week)
Stocks above their 20 DMA: 70% (Overbought. Down from 74% last week)

No man's land

Despite new all time highs, all three oscillators went down a bit this week. A small bearish divergence. There is still euphoria out there and every little deep is still aggressively bought. The index is more than 5% higher than its 50-day average and I think there is some price digestion to make until the averages catch up with the most recent rally. I'm still keeping my "sideways" bias for now and think that chances of a serious correction continue to be slim despite the over valuation. Crashes from all time highs do not happen. It would only make sense that at some point this year a little correction should take place. However, it is unlikely to happen immediately after fresh all-time highs. In any case, this is all my personal bias. Price action will dictate trading decisions as usual.

Losses surely hurt. Especially at the beginning of the year. The credit spreads game has been tougher than usual lately. At times you may feel some frustration and a sour sensation that "this is it, it is impossible to overcome this loss". It is a typical reaction. We've been through this before (down 14% by end of February 2013). Patience is rewarded is all I can say. Periods of extreme price action do not last into eternity. It will take some time to recover the losses, but we'll pull through.

The Russell:
(Click on image to enlarge)
RUT is the only major index that hasn't shown insane upside price action (unlike SPX, Nasdaq and the Dow Jones). That continues to be the case even though it clearly broke resistance. Current positions there looking comfortable.


Current Portfolio


Feb. SPX 2520/2525/2825/2830 Unbalanced Iron Condor
with additional 2625/2630 Credit Put spread plus Long SPY 282 Calls.
Net credit: $1,200. Four weeks to expiration.
(Click on image to enlarge)
Defense lines: 2,630 (adjust the small 2625/2620 Credit Put spread. 2,585 (adjust 2525/2520 Put spread) and 2,820 will be time adjust the 2825/2830 Call side while booking gains from the SPY 282 Long Call contracts.


Feb. RUT/IWM - 1455/1460 - 147 Elephant Put side
Net Credit: $1,060. Four weeks to expiration.
(Click on image to enlarge)
Defense lines: 1,500 (adjust Put side).


Mar. SPX 2900/2905 Credit Call spread
Net Credit: $600
(Click on image to enlarge)
This was the last adjustment to the January Unbalanced Iron Condor. Defense line at 2,895.


Mar. RUT 1440/1450/1680/1690 Unbalanced Iron Condor
Net Credit: $1,680. Eight weeks to expiration.
(Click on image to enlarge)
Defense lines: 1510 (adjust Put spreads). 1640 Close Call side at a loss. The Credit collected on the Put side on entry will more than compensate for the loss. Additionally a small Credit Put spread can be initiated around 10 deltas at that point.


Action Plan for the Week

- I'll be taking a loss on the Feb 2825/2830 Credit Call spreads if SPX reaches 2,815. More aggressive traders can wait until 2,820. At the same time I'll also be closing the SPY Long 282 Calls for gains. I will not deploy new Credit Calls spreads in April as I had planned last week, as that extra margin will start to limit the free capital in the portfolio to continue carrying two positions per monthly cycle. I'd only deploy April Credit Call spreads in very small amounts, not attempting to overcome the losses entirely.

- If the March 2900/2905 Credit Call spread reaches 25 deltas (currently 17), I'll add long SPY 290 Calls using half the credit that was obtained from the Credit Call spreads.

- If RUT reaches 1640 or so, I'll close the Call side (1680/1690) of the March Unbalanced Iron Condor at a loss. This would be a small loss, unable to turn the whole position into a net loser based on the Put side credit. I will also sell a small Credit Put spread at 10 deltas in that scenario.


Economic Calendar

Wednesday: Existing Home Sales.
Thursday: European Central Bank press conference and interest rate decision. US New Home Sales.
Friday: US Core Durable Goods Orders and GDP.

Take it easy folks.
LT


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Check out 2018 Track Record


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