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Sunday, August 2, 2015

Weekend Portfolio Analysis (August 2, 2015)

The SPX went up this week from 2078.19 to 2103.84 for a 1.23% gain. It was an active week for me where I took advantage of some extreme pessimism on Monday to sell an SPX Credit Put spread and just two days later I was closing the Put side of a RUT Iron Condor. The market is now looking more in no man's land than ever and it is a pleasure to say that the positions in the portfolio feel really comfortable at this point.

Market Conditions

(Click on image to enlarge)
Stochastics: 69 (neutral)
McClellan: +60 (neutral)
Number of Stocks above their 20 Day Moving Average: 43% (neutral)

There you have it. No man's land. Not my ideal scenario for individual credit spreads in one side of the market. In these cases I prefer to choose Iron Condors or simply stay put and do nothing when I already have positions on which is the case right now. Basically, for the next play I need an extreme mood to be reached first.

This is one of the hardest, yet underrated skills of a trader: Patience. Waiting for your ideal circumstances before pulling the trigger. Circumstances that may take a long time to show up and in the meantime, without trading, you feel that you are not doing "enough" to make your money grow. This usually results in "forced" trades with less than ideal entries, over-trading and letting commissions eat you alive. For long time readers of this site, you have seen me not make a trade in 30 days, 35 days. It's not that I love that. It's just the nature of the business sometimes. Awful for the blog, as there's no excitement, but it's the responsible thing to do with my trading style. I don't think I will spend that long without entering new trades this time around, but for this upcoming week it looks like I won't get opportunities. We'll see.

August Positions

RUT 1350/1360 Credit Call Spread
99% probability of success, 3 weeks left. With RUT currently at 1238, this one should expire worthless in 3 weeks.

SPX 1925/1930 Credit Put Spread
99% probability of success with 3 weeks left. I'll ride it all the way to expiration date. Current SPX price of 2108 is almost 9% above. 

September Positions

September RUT 1120/1130/1330/1340 unbalanced Iron Condor
84% probability of success, 7 weeks to expiration. Looking very comfortable and making the Lazy Trader look like an old wise wizard.

Action Plan for the week
No concerns about August positions. 

My September RUT position will need adjustments on the Call side in the event RUT reaches 1300. Adjustments to the Put side will be necessary with RUT hitting 1190. Both numbers seem unlikely for just a week of price action. I set up alerts on my platform to be notified just in case, but realistically speaking the probabilities are very low that I will need to adjust anything.

By the way there is a potential new downtrend channel forming in RUT, it is happening inside the longer term uptrend channel. There is potential for some resistance at the upper end of this down trend channel, which would be 1250 - 1255 for this week.  On the way down we also have horizontal support in the 1205 - 1210 region. Those walls should keep my out of the money options safe for now.

(Click on image to enlarge)

As for new positions, I would like to see an extreme sentiment once again. We may see extreme bullishness with SPX rallying about 3% from here, or extreme bearishness again with a small 2.5% dip. If either of those things happen, then I will consider new positions but those numbers are usually unlikely in a week.

Economic Calendar
Sunday: China's HSCB Manufacturing PMI
Monday: Germany's Manufacturing PMI + Europe's Manufacturing PMI. US ISM Manufacturing PMI
Wednesday: Europe Services PMI. US Services PMI. ADP Nonfarm Employment  Change. US ISM Non-Manufacturing PMI
Friday: Nonfarm Payrolls, Unemployment Rate. China's Trade Balance.

Take it easy, but take it anyways. As usual, good luck this week folks!

Check out 2015 Track record

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


  1. Last Week:
    On Monday, I bought a debit put spread. When RUT opened on Monday with a gap down at 1215, my September RUT position was down -5% and the delta of my short RUT Sep 1140 puts was around -22. I bought one debit put spread (RUT Sep 1120/1140 dps) to cut the position delta from 23 to 13. I bought that spread for 6.51, which cut the maximum profit from $1388 to $737. I lowered the profit target on this position to $530 (5% on $10611 margin).

    On Wednesday, I finally closed the remaining three SPX Aug 1830/1850 cps at 0.10. At the end, this position made a profit of $464 (4.92% on $9439 margin).

    With all August positions closed, this expiration month brought $903 (1.75%) to my account. The overall YTD return is now at 23.7%.

    Open Positions:
    6x SPX Sep 1850/1870 cps + 5x SPX Sep 2210/2230 ccs
    6x RUT Sep 1120/1140 cps + 5x RUT Sep 1340/1360 ccs + 1x RUT Sep 1140/1170 dps

    Next Week:
    I will monitor the two September credit spread positions. I would adjust the September SPX position with SPX at around (2000;2140) and the September RUT position when RUT reaches (1190;1290).

    Good trading,

    1. Congrats on your performance this year Martin. Solid numbers.
      Thanks for sharing your positions.

  2. Another great weekly analysis. I agreed with the patience part. In the past I was fixated on making a certain amount a month and it caused me to take on stupid trades and lose even more money. But now I'm focused on protecting the positions I take on and I only take high probability trades. I'm making money every month and sleeping much better.

    Last week:

    Last Monday we had an oversold condition on RUT and SPX. I sold RUT Oct 16th 1060/1050 cps for $0.90 credit and SPX Oct 30th 1800/1790 cps for $0.75 credit.

    I also closed 2 winning trades for almost maximum profit. On Tuesday, I closed RUT Sept 30th 1380/1390 ccs for $0.10 debit. I opened this position on 5/13/15 for $0.80 credit. On Friday, I closed SPX Sept 30th 1725/1700 cps for $0.25 debit. I opened this position on 5/11/15 for $1.35 credit.

    I finished July with a 4% gain for the account. The account is up 18% YTD. All current positions are profitable and safe at this time.

    Current positions:

    RUT September 30th 1000/990 cps - currently profitable; will close in the next couple of weeks

    RUT September 30th 1050/1040 cps - currently profitable; will close in the next couple of weeks

    SPX September 30th 1800/1790 cps - currently profitable; will close in the next couple of weeks

    SPX October 30th 1750/1725 & 2275/2300 iron condor - currently profitable

    SPX November 30th 1750/1725 & 2275/2300 iron condor - currently profitable

    1. Thanks Jonathan.
      You mentioned a critical point which is that of not forcing any arbitrary return number on any given month. It takes a lot of maturity as a trader to psychologically truly interiorize that and just take what the market gives you. Perhaps worth an entire post just to address this.


  3. Hello everyone

    I read once this (think it was Wayne Mcdowell)

    So Patience is a key factor on the equation

    I added an Octuber position to my portfolio
    RUT Sep15 CPS 1040/50 @ 0.6
    RUT Aug15 CCS 1360/70 @ 0.52
    SPX Aug CPS 1815/25 @ 0.45
    RUT Oct15 CPS 1060/50 @ 0.85

    All looking good for the moment

    Happy trading!!