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BookingAlpha Option Trading Advisory

Saturday, May 13, 2017

Weekend Portfolio Analysis (May 13, 2017)

This week's analysis has been published at

Download Weekend Portfolio Analysis (2017-05-13).pdf

If the above link doesn't work for you, simply log in to, navigate to the "Weekly Analysis" tab and download the document from there.

The Weekend Portfolio Analysis will be available on this site next week for historical reference.

All currently open positions can be seen on the Track Record page

Last Weekend Analysis now available: Weekend Portfolio Analysis (May 6, 2017) 
Recent Trading Activity

- Closed Call side of June RUT/IWM Lazy Elephant on Monday for tiny gains $73. The idea was, or is, to be able to deploy at higher strike prices given the early heat I took in this position and the fact that for so long the market has been bought on every little dip. Now, of course that is not being mechanical, and in retrospective it looks like it was not the right choice. We won't always make the right ones, but being fairly risk averse and choosing defense over offense on the Call side is never a terribly bad decision.

Market Conditions
(Click on image to enlarge)
Stochastics: 63 (Neutral. Down from 72 last week)
McClellan: -68 (Neutral. Down from -2 last week)
Stocks above their 20 DMA: 44% (Neutral. Down from 54% last week)

No man's land.
Last week we spotted a subtle divergence: "All the indicators saw slight decreases and yet the index is 15 points higher now...". It was also a defining moment as the SPX was right there battling against horizontal resistance. So, the bearish divergence panned out. Although, sadly with a VIX that seems to want to go lower every day, that was in the single digits during three sessions and it is now at a minuscule 10.40. It is at times like this one, that many ask themselves whether they should continue selling out of the money options during such low volatility environments. My particular approach has always been to continue trading because it can take a while before volatility goes back up significantly. For instance, so far, 2017 has been a pretty quiet year in terms of the VIX. For the most part we have been seeing the VIX between 11 and 13. Yes, we had a little spike up to 16 in mid April, but that was pretty much it. It has mostly been 11-13 VIX. Had we waited for higher VIX readings to sell a couple of options and make some bucks, we would have wasted one third of the year by now and done nothing. But, I get it that it is a dangerous game. So, perhaps trading a little smaller than usual, or avoiding naked, close to the money positions is good advice.

I've added horizontal support at SPX $2,325. Let's see if we get there. It would be nice to see a volatility spike and sell some attractive out of the money Puts. If not, we will quietly keep making money in this boring environment.

The Russell 2000:
(Click on image to enlarge)
Potential support down at 1,335. Resistance still at the higher end of the very long-term and wide channel (max around 1,430 for the week)

Current Portfolio

MAY RUT 1230/1240 Credit Put spread hedged with IWM 126 Long Puts
Net credit: $1092. Expiring this Friday. No concerns.

JUN RUT 1220/1230 Credit Put spread hedged with IWM 126 Long Puts
Net credit: $1130. Five weeks to expiration. This is the Put side of what used to be a Lazy Elephant.
Adjustment point 1,275 this week.

JUN SPX 2240/2250/2465/2475 Unbalanced Iron Condor with SPY 228 long Put
Net credit: $1447. Five weeks to expiration. All good here: 8 deltas on the Call side, 9 deltas on the Put side.
This is the least aggressive (Call side) of an Unbalanced Iron Condor I have ever played with a 4 to 1 ratio of Puts to Calls. I would like to close the Call side early for gains, but not because I'm afraid of it, given how proportionately small it is, but more for strategic purposes thinking of potentially redeploying at the same strikes should the markets rebound. Adjustment points for the week are SPX 2,315 and SPX 2,435. On the Call side we can wait until SPX 2,455 given how small it is and move it up to SPX 2,500 if an adjustment is necessary, which is my plan with this one.

Action Plan for the Week

-  Let the May RUT Credit Put spread (remainder of Elephant) expire for max profit on Friday.

- Defend the June RUT Credit Put spread if RUT falls down to 1,275. Unlikely given how far from that RUT is.

-  Initiate new position only if we reach an oversold environment (Credit Put spread). I would go with RUT and July expiration which is 10 weeks away (farther out that usual), but I just don't want to add another one in the same June, where a RUT Credit Put spread already exists.

- If the market falls, and $200+ bucks can be obtained from the Call side of the June SPX Unbalanced IC, then I may consider the Call side for a chance to redeploy it on an eventual rebound. But decent time for re-establishing that Call side with June expiration is running out. Defend Put side of this same position at SPX 2315, by closing it for a loss and redeploy at the new 10 delta level.

The LT Trend Sniper system is now out of the long EURUSD trade. SL was hit this week at the break-even level. Sniper's results tracked here.

Economic Calendar

Sunday: China Industrial Production.
Tuesday: German ZEW Economic Sentiment. US Building Permits. 
Wednesday: Europe CPI. US Crude Oil Inventories.

Good luck this week folks,

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Check out 2017 Track Record

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