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Saturday, October 13, 2018

Weekend Portfolio Analysis (October 13)

This week's analysis has been published at

Download Weekend Portfolio Analysis (2018-10-13).pdf

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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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

Previous Analysis now publicly available:
Weekend Portfolio Analysis (October 6, 2018) 
Recent Trading Activity

- Deployed November SPX Credit Put spread on Monday for a $1200 credit.

- Took a loss on the October RUT Elephant Put side. Deployed new RUT Credit Spread using December options. The loss was $3200. The credit received from the new December Spread was $1200. The Put side of the RUT Elephant was therefore adjusted twice (October 5th and October 11th).

Market Conditions
(Click on image to enlarge)
Stochastics: 11 (Oversold. Down from 38)
McClellan: -223 (Oversold. Down from -198)
Stocks above their 20 DMA: 11% (Oversold. Down from 27% last week)

Oversold environment.

We're in an overly pessimistic environment, and with the VIX above 20 it is the perfect environment for out of the money Put selling. You can position yourself very far out. For example in the low 1300's in RUT (December) or the low 2400's in SPX (also December options). In my experience, this is the best scenario for options selling. Where fear is at extremes, options are inflated and you can also deploy positions very far out.

Another alternative, and something I did in another account, is to bet on a rebound with a semi free bet: Long a SPY 290 January Call, and the debit paid for that was obtained from selling a 250 Put. The Sale of the Put gave me a larger credit than the cost of the long Call. Now, I'm in a bull risk reversal position where, I can make decent money if the market rebounds. If the market does not rebound but remains above SPY 250 (SPX 2500), then no money is lost, in fact there is a small gain which is the net credit obtained in the operation. And finally if SPY is below 250 by December expiration, I am willing to get 100 SPY shares assigned at that price. I didn't report this activity in the track record as it happened on a separate account that I own for long term investment purposes. But I thought it would be worth it to mention it here. Not for you to follow my idea, but to maybe learn something useful that may come in handy in your future investment activities, on indexes, ETFs, or stocks.

On a technical Level, price penetrated the 200 day average and the long term diagonal support. This is the part that would concern me a bit. However, I think a temporary bottom is close. Friday's price action, closing way above the lows of the day is an encouraging indication that a new support level can be established. If at least horizontally.

The Russell Index:
(Click on image to enlarge)
Also oversold, below the 200-day, and below long term diagonal support. I'm now looking at horizontal support around 1,525. I have a bullish bias coming into the week. I think the oversold condition will be somewhat alleviated as too many stocks are in oversold territory.

Current Portfolio:
The SPY Calls and SVXY Calls expire in December and January of next year. All bullish bets on a market rebound.

Let's now look at the income plays.

Oct RUT/IWM - 1810/1820 - 182 Elephant Call side
Net Credit: $360. One week to expiration.
(Click on image to enlarge)
Sure winner by now. It will expire this Friday.

Nov RUT/IWM - 1460/1470/1810/1820 - 182 Elephant
Net Credit: $1568. Five weeks to expiration.
(Click on image to enlarge)
Defense lines: 1,525 to the downside (adjust Put side). 1,780 to the upside (close entire Call side at a loss. Keep riding Put side).

Nov SPX 2630/2620 Credit Put spread
Net Credit: $1200. Five weeks to expiration
(Click on image to enlarge)
Defense line: 2715.

Dec RUT 1350/1340 Credit Put spread
Net Credit: $1200. Ten weeks to expiration
(Click on image to enlarge)
Defense line: 1435

Action Plan for the Week

- No new positions in mind as there is enough exposure already. The plan is to just baby-sit existing ones and consider defensive action if the market sell-off continues.

Special Note

2018 has been a tough year. Despite the dismal results with Elephants, I've been doing good in terms of Forex and Long term investments, where most of my capital is. It is not the market who has made 2018 a difficult year. At a personal level, it has been the cruelest year of my life with two losses in the family. One of them, a truly devastating one. My father. A healthy, strong man. Gone too soon. Unexpectedly.

I rarely talk about personal matters here. I've been able to come to this corner week after week and isolate my mind from personal issues, preferring to focus almost exclusively on the Trading and Investing side of things. But it has been a long time. I'm feeling somewhat burned out and readers deserve consideration. After all, I have made friendships with many here. And if not that, at least a few nice moments of camaraderie and exchange of valuable information.

For the last couple of months it has been hard to bring myself to this site every week and write something up. Affected and with a different perspective on life, I've been lacking the necessary motivation that fueled me eight years ago when the site was born. Writing here should not be a felt as a shore, let alone enslavement. The truth is I need a break.

I will continue writing the Weekend Portfolio Articles for the rest of 2018 out of consideration. However, as the year wraps up,  I won't be including 2019 trades in these articles. The Credit Spreads/Iron Condors/Elephants track record will conclude in 2018 and so will the Weekend Analysis routine.

I don't plan to stop writing entirely or shut down the site. Just a temporary break first. Then I will just re-focus it a little bit. Perhaps without a hard commitment of X number of articles per month, or an article every X days etc. It also makes sense to me to stop making Elephants/Credit spreads and Condors the center of the site, when in reality, is one of the smallest things I do with my capital nowadays, after realizing over the years that I'm more of an investor than an active trader. So, I plan to write articles about investments I've made; investing ideas; the on/off Options plays with good risk/reward in specific names and so on.

Thank you all.
And as usual, good luck this week my friends. LT

Check out 2018 Track Record

Go to the bottom of this page in order to see the Legal Stuff

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