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Saturday, February 17, 2018

Weekend Portfolio Analysis (February 17, 2018)

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

Download Weekend Portfolio Analysis (2018-02-17).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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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 (February 10, 2018) 
Recent Trading Activity

- No Activity

Market Conditions
(Click on image to enlarge)
Stochastics: 87 (Overbought. Up from 19)
McClellan: +71 (Neutral. Up from -224)
Stocks above their 20 DMA: 40% (Neutral. Down from 10%)

No man's land.

From Oversold we are back to No man's land. The incipient bullish divergence mentioned here last week played out nicely. The SPX is at an interesting point right now as it approaches what for years was resistance on the way up. It failed to break it on a first attempt, we'll see how it fairs next. There's plenty of room to break it and with the index this close to its 50 day and with only 40% of stocks trading above their respective 20-day average, getting past that resistance point should not be a problem. That would make the up-trending resistance line, that for so many years was in play, pretty much irrelevant.

VIX still elevated above 20, combined with a no man's land condition makes this a good environment for neutral plays. In fact I'm going to take advantage of it early in the week.

The Russell Index:
(Click on image to enlarge)
A little farther from resistance than the S&P, and also near the 50-day average. Plenty of room to move here. There is a March Unbalanced Iron Condor here that I'm planning to liquidate.

Current Portfolio

These are the current positions:

The SPY Calls and SVXY Calls expire in December and January of next year. Same as the Synthetic stock position, which is equivalent to being long 200 shares of SPY, but needing much less buying power. The goal with all of them is to hold them for as long as possible. They may fail, of course, but they are calculated risks. All the SPY and SVXY Calls barely add up to seven thousand dollars. Or 7% of the original 100K portfolio. The synthetic SPY stock position occupies decent room (13.8K), but since it is the same as being long stocks, there is no way to lose all that money. For example if SPX finishes the year at 2500 (SPY 250), it would be a 14 point loss (from artificially long stock at 264). So, 14 points multiplied by 200 synthetic shares would be a $2800 loss. A similar calculation can be done assuming SPY finishes the year at 240, 230 etc.
Let's now look at the income plays.


Mar. RUT 1320/1330/1680/1690 Unbalanced Iron Condor
Net Credit: $1,840. Four weeks to expiration.
(Click on image to enlarge)
Defense lines: 1373 (adjust Put spreads). 1650 Close Call side at a loss. Both extremely unlikely. With the recent volatility contraction, almost all the profit has been made in this position.


June. SPX 2025/2050 Credit Put spread
Net Credit: $1,320 and seventeen weeks to expiration
(Click on image to enlarge)
Defense line: 2250 (adjust the Put side). Rough estimate as it is so far out in time.


Action Plan for the Week

1- I'll liquidate the March RUT Unbalanced Iron Condor. I usually let them get closer to expiration but with 90% of the profit made and still four weeks to expiration, there's no point in waiting this time. Also, 57K of the portfolio is invested, and the size of the portfolio is now roughly 72K after the large draw-down. So, with only 15K of capital being free, it will be necessary to close a position in order to deploy a brand new one.

2- I'll initiate an April SPX position. You can go with either a 4:1 Unbalanced Iron Condor 2440/2450/2915/2925  or an Unbalanced Elephant (same SPX strike prices) with additional long SPY Calls (Read Elephants vs Iron Condors (Full Comparison)).
The Number of contracts for the SPX Elephant on a large portfolio would be 20/20/8/8 plus 6 SPY Calls (strike 292).
For a smaller account (20 grand) you can play 4/4/2/2 plus 2 SPY Calls, or 4/4/4/4 plus 5 SPY Calls.
For an even smaller account (10 grand) you can play the Elephant as follows: 2/2/1/1 plus 1 SPY Call. I'm thinking of opening the position early in the week, to be as faithful as possible to the aforementioned strike prices and take advantage of the elevated VIX while it lasts.


3- As for the June SPX 2050/2025 Credit Put spread, there's no way I'm holding that for 17 weeks. Original credit per spread was 1.65. I'll gladly exit early for 0.40 debit, booking a 1.25 gain per spread ($1000 in 8 spreads).



Economic Calendar

Monday: US Markets closed for Presidents' Day.
Tuesday: German's ZEW Economic Sentiment and Inflation Report.
Wednesday: US Manufacturing PMI, Existing Home Sales, FOMC Minutes.
Thursday: European Central Bank publishes Account of Monetary Policy Meeting.
Friday: Europe CPI

Good luck this week folks.
LT


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Check out 2018 Track Record


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