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BookingAlpha Option Trading Advisory

Wednesday, September 18, 2013

October positions adjustments

What a day in the markets today! I made three trades in total, all of them using October options. Before going to the action, these are the positions that I had in October:

October SPX 1575/1580/1750/1755 Iron Condor
October RUT 1120/1125 Bear Call Spread

After 2pm the orgy began and SPX went up to a high of 1729 a few minutes later. The 1750 short strike of the SPX Iron Condor hit the 30% probability of expiring in the money and I rolled it up to 1780 as follows:

Bought to Close 4 SPX October 1750 Call @10.80
Sold to Close 4 SPX October 1755 Call  @9.00
Sold to Open 4 SPX October 1780 Call  @3.30
Bought to Open 4 SPX October 1785 Call @2.60

All for a Net Debit of 1.10
In particular, the 1750/1755 Call Spread was closed for 1.80 debit. Because a credit of 0.50 had been received initially for it, this trade represents a 1.30 loss.

After that I sold an SPX 1615/1620 Bull Put spread as follows:
Bought to Open 4 SPX October 1615 Put @3.40
Sold  to Open 4 SPX October 1620 Put @3.70
Credit received: 0.30 ($120)
Max Risk: 4.70 ($1880)
30 Days to expiration
And the 1620 strike with a 10% probability of expiring in the money.

Finally the last trade of the day was simply closing the 1575/1580 SPX Put spread for a small profit:
Sold to Close 4 SPX October 1575 Put @1.65
Bought to Close 4 SPX October 1580 Put @1.75
Debit 0.10 ($40), and because this spread had a credit of 0.30, it is a small 0.20 win ($80)

I didn't do anything with the existing RUT 1120/1125 Bear Call Spread.

As a result the October portfolio now has:
1- SPX 1615/1620/1780/1785 Iron Condor (1.00 total credit.0.70 on the Calls side and 0.30 on the Puts)
2- RUT 1120/1125 Bear Call spread (0.50 credit)

With SPX at 1729 and RUT at almost 1077 I feel comfortable with those two positions. The market is probably at its hottest point this year and needs a rest (Stochastics 94, McClellan at its highest this year +265 and 80% of the stocks are above their 20SMA) With the accumulated credit of $600 in the two open positions, it is possible to make October a positive month.

(Click on image to enlarge)

Check out 2013 Track Record

Related Articles
Weekend Portfolio Analysis (September 21, 2013)
Weekend Portfolio Analysis (September 28, 2013)
Weekend Portfolio Analysis (October 5, 2013)
October SPX Credit Put Spread adjustment plus a new RUT Credit Put Spread
Weekend Portfolio Analysis (October 12, 2013)
SPX 1780/1785 reaches successful expiration

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  1. This is probably the worst year in a long time to sell bear call spreads. As long as QE is still around, be very careful with bear call spreads.

  2. Hi Henrick,

    One other thing, I would have waited to hear the Fed announcement today before selling that RUT November bear call spread. I know you did it on Tuesday and you have a very good reason to do it because the market is overbought. An overbought market can stay overbought for a while. How long are you going to wait until you hedge that position? Sure, the market will pull back eventually but can you hedge with the 1000/995. It seems safe for now. If markets do come crashing down, you can always roll it down. In a bull market, the bear call spreads will most likely give you trouble not the bull put spreads. Just some things to think about. You obviously understand risk and have a good handle on risk management. So your discipline and rules will protect you in a market crash which I don't see happening until next year.

  3. That's a goood idea, in fact I've been thinking about. I will give it more thought today and will maybe hedge. Thanks.