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Saturday, October 6, 2018

Weekend Portfolio Analysis (October 6, 2018)

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

Download Weekend Portfolio Analysis (2018-10-06).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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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


Previous Analysis now publicly available:
Weekend Portfolio Analysis (September 29, 2018) 
Recent Trading Activity

- Closed SPX November Elephant on Tuesday earlier than usual. A $1,119 profit.

- Adjusted Put side of RUT October Elephant on Friday. A $3,088 loss.

- Adjusted Put side of RUT November Elephant on Friday. A $2,973 loss.

- As for the second November position, I wanted to play SPX and was giving it a chance to reach fully oversold mode. Didn't quite get there for SPX and I'm going to give it another chance on Monday. If no oversold environment is materialized on Monday, then I'll go with an Elephant.

 It was a painful week. No way to sugar-coat it (not that I ever want to). In retrospect, the mistake was closing the SPX position instead of a RUT one, given that, it was RUT the symbol where two positions existed that had the same defense point. It would have been definitely better to take October RUT off the table, for a small win, and avoid the potential double loss of Oct + Nov positions. The funny thing is, if you go back to the trade plan, it was exactly to remove one of the RUT positions. But greed took over me. I removed the SPX Elephant simply because it had made way more profit, thinking I would be able to milk more off of the October RUT Elephant, and that, markets would never correct again. In this case, just as in February, it is not the particular position, or strategy. It has been my lack of discipline that has made matters worst. It's been a tough year, both at a personal and a professional level. But, we learn, we use multiple investing strategies, and we move on. My investing/trading approach has varied a lot over the years to the point where Credit Spreads & Elephants are just a small part of my activity. Nowadays, I'm even lazier than before in that I'm more of a long term investor than an active trader. I'll talk about these things in more details as the year wraps up and I'll also make comments about changes on the website for 2019.

Market Conditions
(Click on image to enlarge)
Stochastics: 38 (Neutral. Up from 37)
McClellan: -198 (Oversold. Down from -57)
Stocks above their 20 DMA: 27% (Oversold. Down from 44% last week)

No man's land but very close to short-term oversold

In fact, the two most important oscillators are in overly pessimistic territory now and it would take only a small market decline to move Stochastics to that area too. Late action on Friday was constructive though, and a rebound may be in play already. VIX now better at 14.82, making option premiums more attractive. 2,870 acted as support as has been drawn on the chart for a while and to me, the 2870-2940 zone will continue to be in play. A break below 2870 leaves 2,800 as the next support level, so 2.5% lower. I think chances of getting there are low especially as we approach November.


The Russell Index:
(Click on image to enlarge)
Russell is actually in oversold territory, with all 3 indicators down there. If it weren't for the fact that I have two RUT positions on, I would have sold a Credit Put spread. A rebound seems to be underway now and the 1,610 levels continues to be horizontal support. After the adjustments made on the Put sides, both RUT Elephants look comfortable.


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 - 1530/1540/1810/1820 - 182 Elephant
Net Credit: $1560. Two weeks to expiration.
(Click on image to enlarge)
Defense lines: 1,570 to the downside (adjust Put side). 1,780 to the upside (close entire Call side at a loss. Keep riding Put side).


Nov RUT/IWM - 1460/1470/1810/1820 - 182 Elephant
Net Credit: $1568. Six weeks to expiration.
(Click on image to enlarge)
Defense lines: 1,525 to the downside (adjust Put side). 1,775 to the upside (close entire Call side at a loss. Keep riding Put side).



Action Plan for the Week

- To deploy an SPX position on Monday. If we reach an oversold environment, then it will be an SPX Credit Put spread around 10 deltas. Otherwise It'll be a November SPX Elephant following the usual guidelines.


Economic Calendar

Thursday: ECB publishes account of Monetary Policy Meeting. US Core CPI. Federal Budget Balance. 
Friday: Michigan Consumer Sentiment.

Good luck this week!
LT


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Check out 2018 Track Record


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