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Saturday, February 28, 2015

Weekend Portfolio Analysis (February 28, 2015)

We opened the week at 2109.83 and closed it at 2104.50. That's a small 0.25% loss and the SPX index is now up 2.21% year to date. With the candles of the last three days, the "close to overbought" condition was relieved and we are now at a more neutral stage, not ideal for my style of Credit spreads selling. The short term overbought extreme was never fully reached, so I didn't get a chance to add new positions during the week. That's fine because it means that my existing ones are looking pretty good now.

Market conditions
Horizontal yellow lines represent the boundaries of my March and April Iron Condors. In other words, those are the points I don't want the market to reach.
(Click on image to enlarge)
Stochastics: 71 (neutral)
McClellan: +25 (neutral)
Stocks above their 20 Day Moving Average: 63% (neutral)

Neutral territory here and plenty of room to move in either direction before reaching the boundaries of the long term channel. I'm cautious in circumstances like this and prefer to not play individual credit spreads. The last price extreme was December 16, 2014 where I played a successful Credit Put spread. Since then I haven't seen short term extreme markets, so my activity continues to be pretty limited to long term Iron Condors. I'm really not complaining. So far, so good. My positions haven't been threatened in 2015 and I've been trading without pressure. Thankfully.

March positions
SPX 1845/1850/2170/2175 unbalanced Iron Condor
20 days to expiration and 81% probability of success. Starting to look very good. No concerns with this position right now.

April positions
SPX 1855/1860/2200/2205 unbalanced Iron Condor
80% probability of success 48 days to expiration. Also looking great but this is a young position. Lots of baby-sitting ahead. No concerns at all by now and shouldn't be a problem in the upcoming days.

Action plan for the week
Ok here's the thing. Last weekend I mentioned the top on the way up for the week was 2135.  I didn't see SPX going beyond that. I turned out to be right. It's a very simple yet effective analysis that takes into account how far the hypothetical price would be from its own 50 Day Moving Average and then judging whether that would be extremely rare based on past history. For this week I think 2138 would be a stretch. But to make it pretty, let's use a round number. Let's say 2140. I believe 2140 is very unlikely in the next 5 trading sessions.

Well, according to my estimations, the Call side of the March Iron Condor (2170/2175) reaches the adjustment point at around SPX 2150 (30% probability of being in the money). If I think SPX 2140 is not going to happen, I feel even more confident that we won't see 2150. For the April Iron Condor the adjustment point is even beyond that, around 2165 or so. All this means, I am not concerned if the market moves up as I believe my adjustment points will not be reached in a week.

On the way down there is plenty of room in both trades. Adjustments won't be necessary.

As for entering new positions. I will only sell Credit Call spreads if I get to sell March RUT 1300/1310 Credit Call spread for 1.00 or better. That is looking like a very remote possibility. I would also sell April RUT 1330/1340 for 1.00 credit or better. It's far from that. But those are two plays I would do without hesitation. Not both at the same time obviously, I would only trade one of them.

As for Credit Put spreads, I need for SPX to fall to at least 2030 - 2035. That's close to 4% below current prices. A 4% move in just a week is not common. So, chances are, I won't enter Credit Put spreads in the next trading sessions.

Overall, it all looks like I won't enter new trades. But that's fine. I'm happy riding my existing Iron Condors problem free.

Long Term Investing
This week I bought 5 shares of Toronto Dominion Bank (TD) at $53.06 Canadian Dollars on Tuesday. It was a pretty well timed purchase. This is a small capital that I had accumulated as a result of dividends and it was simply sitting idle. I now own 31 shares of TD which I plan to hold forever.

As I mentioned earlier, my long term investment activity will be limited in 2015 as a result of my move to the US, the need for capital at hand, the uncertainty around the job situation and the first three mandatory months without a work permit and so on. However, there are a few things that I want to accomplish in my long term investment accounts. Lately my portfolio has been too susceptible to the price of oil instead of the price of the overall markets. On any given day, I look at the oil futures and I immediately know whether my portfolio will be up or down regardless of what the TSX or the SPX indexes do. Obviously, I have more exposure to energy than necessary. I own shares of Exxon Mobil (XOM), Chevron (CVX), Suncor Energy (SU.TO), Crescent Point Energy (CPG.TO) and Black Diamond (BDI.TO).

While I'm fine holding Exxon, Chevron and Suncor, the other two do not make me very happy. I want to cut my holdings in Crescent point by at least half. I currently own 114 shares so I can start doing things like Covered Calls. As for Black Diamond, I want to get rid of it entirely. These two investments were mistakes that do not align with my investment philosophy: Crescent Point is not a dividend grower, Black Diamond is still too small a company. Those two were just speculative moves. I felt attracted by the dividend yield offered by CPG and by potential exponential growth of a small company like BDI (less than a billion in market cap). But obviously I'm not at ease with these holdings nor with the overall sensitivity of the portfolio to the price of oil.

In addition to this, for 2015 I also want to increase my position in TD to about 50 - 55 shares. I would like to initiate positions in Canada National Railway (CNR.TO) and Enbridge (ENB.TO) as well as increase my existing position in TransCanada (TRP.TO). Just waiting for better prices in all three of them. If I get to do all this in 2015 I will be very satisfied with my long term investment portfolio and will be able to sleep much better.

The LT Trend Sniper robot started its second position of the year just a few hours ago. The beast went short EURUSD at 1.11972 with Stop Loss set at 1.13847. It's betting on a continuation of the long term downtrend. We'll see how this one goes.

(Click on image to enlarge)
For live progress updates of this position you can always visit

Economic Calendar
Sunday: Chinese Manufacturing PMI
Monday: German Manufacturing PMI. Europe's CPI. US ISM Manufacturing PMI
Wednesday: ADP Nonfarm Employment Change, ISM Non-Manufacturing PMI
Friday: US Nonfarm Payrolls, Trade Balance, Unemployment Rate

Good luck this week my friends!

Check out 2015 Track record

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


  1. Last Monday, I closed my last remaining position in the account for almost full profits. I was briefly in 100% cash position for the first time since I began trading this account. It is rare for me to be in 100% cash but there were no trades in the last 50 days that I wanted to take with any conviction.

    I could have sold some credit call spreads this month but I learned that it is better to wait longer to sell calls than puts. We were slightly overbought on SPX on Feb 20th when we closed at 2109 but due to the low VIX, I did not feel comfortable with selling any April credit call spreads.

    I finally made a trade last Wednesday. After waiting 50 days I made the first trade of the month. Did I beat your record for number of days before making a trade?

    I sold June 30th RUT 1000/990 & 1380/1390 iron condor for $1.17 credit. I chose a June iron condor because I did not like any of the short strikes for April or May. I feel I could not get far enough from the market to make it worthwhile for me.

    With this iron condor, I have an 11% buffer on the call side and 21% buffer on the put side. I will not have to worry if RUT continues to climb higher or start to go down. The buffer is big enough to withstand most normal market fluctuation.

    My hope is that RUT stays between 1100 and 1300 for the next 2 months. If it does, I can probably close this iron condor for a very nice profit. I don’t plan to hold it all the way until expiration. I plan to close it when it is around .10 debit.

    What I did last week:

    1. On Monday, I closed the Mar 31st RUT 1000/990 cps for .10 debit
    2. On Wednesday, I sold the June 30th RUT 1000/990 & 1380/1390 iron condor for $1.17 credit

    Plans for this week:

    I want to sell June 30th SPX iron condor.

    Current Position:

    June 30th RUT 1000/990 & 1380/1390 iron condor

    You can follow me on Twitter @lienjonathan where I tweet my high probability credit spread trades in real-time for free. You can like my Facebook page and see all my open and closed trades and track record below.

    1. Wow 50 days of inactivity easily breaks my record. I thought that was unlikely as I think you tend to be a little more active than me.

      Wise decision avoiding the SPX Calls. I think it was the right decision even though in hindsight we would have probably made money.


    2. "there were no trades in the last 50 days that I wanted to take with any conviction"
      Patience pays off.

      "I feel I could not get far enough from the market"
      That's right. Last week, I put on two ICs: (i) RUT Apr 1050/1070/1320/1350. With RUT at 1220, I sold puts/calls 12%/8% away from RUT. (ii) SPX Apr 1850/1870/2200/2220. With SPX at 2095, I sold puts/calls 10%/5% away from SPX. That is pretty tight for almost 60-day ICs.

      "I have an 11% buffer on the call side and 21% buffer on the put side"
      Jonathan, I wonder, if you have a minimum distance between sold puts/calls and the current price of underlying. For example, minimum 20% for puts and 10% for calls.

      Thanks, Martin.

    3. Hi Martin,

      I am willing to have a buffer of 10% to 25% for puts. 5% to 15% for calls.