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Saturday, January 2, 2016

Weekend Portfolio Analysis (January 2, 2016)

Happy New Year.
We are all one year closer to death now. Yayyy! Congratulations and my condolences.

The SPX index went from 2058.90 to 2043.94 in 2015 for a -0.7% return. Shares of SPX cannot be bought, so the proxy ETF, the SPY, is the vehicle of choice by default, which does a little bit better as it pays dividends. Return for the year: +1.3%. Of course, taxes are to be paid to the king on those dividends. You also need to consider trading commissions depending on the broker, and finally the management fee of the ETF itself. It is therefore, pretty safe to say that most investors were flat to negative in 2015.

As for the new year, it is going to be a really interesting one with the Super Cheap Money Era coming to an end, and pretty much every developed nation except the US sucking right now.

Recent Trading Activity

- Peaceful week. Just eating and gaining weight. No trades.

Market Conditions
(Click on image to enlarge)
Stochastics: 74 (neutral)
McClellan: +30 (neutral)
Stocks above their 20 Day Moving Average: 43% (neutral)

No man's land. Good for Iron Condors. Not ideal for individual Credit Spreads on one side of the market, as there is plenty of room to go either way.

VIX above 18, making it attractive to sell options. I would definitely go with an Iron Condor if I didn't have two of them on already.

Other than that, horizontal price action which may be in play for a while. I will be looking at all those horizontal lines and deploying my positions outside of them as much as I can for the next few months.

Current Portfolio
January SPX 1865/1875/2200/2210 unbalanced Iron Condor
$2,300 credit. 2 weeks to expiration. 96% probability of success. This is a winner. Will ride it all the way to expiration.

January SPY 169 Long Puts
Anti-crash protection. $486 debit.

March IWM 112/112/120 Synthetic Stock Hedged
Speculative Bullish play. Max risk only $520.We had a chance to close it this past week for about 15% return before the market started to fall. It hasn't played out as expected but it is only a 0.52% risk on the overall portfolio. I will keep riding it and see if it can be closed for a 20% - 30% return on investment.

April29 SPX 1700/1725/2250/2275 unbalanced Iron Condor
$2,760 credit. 4 months to expiration. Looking safe.

April SPY 161 Long Puts
Anti-crash protection. $462 debit.

Action Plan for the Week 
The first week of the year is always interesting in the markets. All the big funds will be deploying capital in different asset classes according to their views and trading volume is only bound to increment. In addition to this, we have important news releases such as the jobs numbers and the unemployment rate in the US. So, I'm really looking forward to this week, waiting to see if we reach an extreme market sentiment on one side before I deploy my next position.

Everything is currently safe in the portfolio and won't need defense. As for new trades, a Credit Spread but only if the market goes to a pessimistic or an optimistic extreme. If we don't see it, then no new trades.

Finally, take a 20 - 30% profit on the IWM Synthetic Stock Hedged position if the market gives the opportunity.

Economic Calendar
Monday: US ISM Manufacturing PMI
Tuesday: Germany's Unemployment numbers and Europe's CPI
Wednesday: ADP Non-Farm employment change. ISM Non-Manufacturing PMI
Friday: US Non-Farm Payrolls. Unemployment Rate

We are up +1.25% with 2016 options. The portfolio is 64% in cash, 36% at risk.
Good luck this week folks!


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Check out 2016 Track Record

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