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BookingAlpha Option Trading Advisory

Saturday, December 8, 2018

Weekend Portfolio Analysis (December 8, 2018)

Recent Trading Activity

- No Activity.

Reminder: As explained in the October 13 article, I will stop writing Weekend Portfolio Analyses at the end of 2018. I will keep trading and keeping a track record of the positions as usual.

Market Conditions
(Click on image to enlarge)
Stochastics: 29 (Neutral. Downfrom 94)
McClellan: -53 (Neutral. Down from +82)
Stocks above their 20 DMA: 23% (Oversold. Down from 54%)

No man's land

S&P down 4.6% for the week after initially hitting resistance right at 2,800. What a difference one week makes. The battle ground continues to be 2600-2800, and I think it will continue to be for a while. This week will be decisive given all the negative sentiment out there at the moment and how close we are to the bottom of the range. Technically it is no man's land but the oscillators are closer to oversold much more than they are to overbought territory. Still, a break below 2600 could potentially trigger panic. Call me crazy, I still think this 2600-2800 will be in play for a while. Now, on Monday in particular I believe we see a price lower than Friday's low and we reach oversold extreme then. Of course, nobody has a magic wand, even those who have been watching the markets for 3 decades are surprised almost on a daily basis with this market.

VIX at 23, close to oversold, good time for way out of the money Put selling.

Support around 2,600. That's the key level to watch this week.

The Russell Index:
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The concerning part here is that support seems to have been broken. And with oscillators not entirely at an oversold extreme yet, this leaves a little more downside room for support to be unquestionably broken. Small caps are at an even more crucial point. Monday (where I think there will be more weakness for a while) and Tuesday will be crucial this upcoming week.

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 rest of the positions

Dec RUT 1350/1340 Credit Put spread
Net Credit: $1400. Two weeks to expiration
(Click on image to enlarge)
Defense line: 1400. Adjust Credit Put spread down. In retrospective, there were so many profitable positions that I should have taken off earlier. This one is an example. Very profitable/comfortable just a week ago.

Dec SPX/SPY - 2490/2500/2910/2920 - 257/292 Elephant
Net Credit: $1513. Two weeks to expiration.
(Click on image to enlarge)
Defense lines: 2,590 to the downside (adjust Put side). 2,875 to the upside (Close entire Call side at a loss. Keep riding Put side, whose credit is greater than any loss to be suffered on the Call side, resulting in a net winning position in the end).

Action Plan for the Week

- Just watch for potential defense on the existing positions.

Economic Calendar

Tuesday: US PPI. 
Wednesday: Fed Chair Powell testifies. Core CPI.
Thursday: ECB Press Conference.
Friday: US Retail Sales, Manufacturing PMI, Industrial Production.

Good luck this week folks,

Check out 2018 Track Record

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