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BookingAlpha Option Trading Advisory

Saturday, August 26, 2017

Weekend Portfolio Analysis (August 26, 2017)

This week's analysis has been published at

Download Weekend Portfolio Analysis (2017-08-26).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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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 publicly available: Weekend Portfolio Analysis (August 19, 2017) 
Recent Trading Activity

- Initiated an SPX - October 2250/2260/2540/2545 Unbalanced Iron Condor on Friday for a total credit of $1,500.

Market Conditions
(Click on image to enlarge)
Stochastics: 42 (Neutral. Up from 22 last week)
McClellan: +20 (Neutral. Up from -147 last week)
Stocks above their 20 DMA: 42% (Neutral. Up from 25% last week)

No man's land.

That incipient bullish divergence mentioned here last week seems to have played out and we now have a true no man's land market again, with nice room on both sides to reach an extreme. Oscillators pointing up, suggesting some more upside in the short run. A small horizontal channel has been drawn this week that covers from SPX 2,410 (support) to SPX 2,485 (resistance) and I believe chances are for prices to stay trapped in that area for a couple of weeks. We'll see.

We're also coming to the end of August and trading volumes should start to increase little by little. One factor that will start to get into the market picture little by little is the US Debt Ceiling concerns. The markets will have to deal with that dark cloud during September, and there is a chance it will limit rallies to new all time highs. As you know, I try to not make anything of "Fundamental" analysis or "Financial News" because even if you guessed outcomes right, how many times have we seen the markets rally on seemingly bad news or correct on good ones? That said, we've been through Debt Ceiling issues in the past and learned that politicians have a really hard time agreeing on topics that matter, with a heavy tendency to solve things at the very last minute or kick the proverbial can down the road. In the last few years, that's the moment when rallies have been unleashed. But that may take place by October, not immediately.

The Russell 2000:
(Click on image to enlarge)
Much weaker all year and still significantly below the 50-day average.
Potential horizontal support remains around 1,340, then the 1,310 region. Two Credit Put spreads in play here, so obviously a rally would be more beneficial to the portfolio.

Current Portfolio

SEP SPX 2300/2310 Credit Put spread
Net Credit: $1,100. Three weeks to expiration. Remainder of what originally was an Unbalanced Iron Condor. 6 deltas. Great improvement in the last couple of weeks.
(Click on image to enlarge)
Defense line: 2,365. I'd adjust it using the same September expiration cycle.

SEP RUT 1240/1250 Credit Put spread
SEP IWM 148 Long Calls
What is left of the September Elephant.
Net Credit: $840. Three weeks to expiration.
(Click on image to enlarge)
Defense line: 1,290.

OCT RUT 1200/1190 Credit Put spread
Net Credit: $1,200. Eight weeks to expiration. 6 deltas, nice improvement from 10 deltas last week.
(Click on image to enlarge)
Defense line: 1,260.

OCT SPX 2250/2260/2540/2545 Unbalanced Iron Condor
The trade entered 24 hours ago. 8 weeks to expiration and obviously lots of baby-sitting ahead.
(Click on image to enlarge)
Defense lines: 2,340 to the downside and 2,535 to the upside, waiting until about 45 deltas given the low risk exposure on the Call side.

DEC SPY 253 Calls
Small bullish speculative play from August 18th. Three contracts at 1.50 debit each.
Current price is 1.615. No intention to close this one for now.
GTC order in place to close at 3.00 credit. Basically a 100% return on investment.
The good thing about this play is that it will now serve as a hedge to all the Credit spreads that are sold until the end of the year. For instance, the October SPX Unbalanced Iron Condor above. If SPX rallies past 2,535 I'd be taking the Call side off at a loss, but then these DEC SPY 253 Calls would be worth a lot more, which can be used to mitigate upside losses from Credit Call spreads.

Action Plan for the Week

There is downside exposure in four positions. A bit too much for my liking. It will be top priority this week to close at least one of them.

- Reduce downside exposure by closing the October RUT 1200/1190 Credit Put spread. A 0.60 credit per vertical spread was obtained when the position was entered. Current value is 0.40 so there is a small gain already. It would be ideal to close it for 0.30 debit, as that would be 50% of the max potential gain ($600 gain) having held it for only 2 weeks and with almost 8 more weeks to expiration.So, 20% of the time (2 weeks out of 10 to expiration) and 50% of max gains achieved, that would be sweet. I may close it however for 0.35 debit (0.25 gain per = +$500). The real urgency is to alleviate downside risk in the portfolio.

- Close the September SPX 2310/2300 Credit Put spread for $900 profit whenever possible. That would mean closing each spread for 0.10 debit, as the original credit received was 0.55 per spread. There is a GTC order (0.10 debit to close) in place already for that. Looking for a 0.45 gain in 20 spreads.

- Close December SPY Long Calls at 3.00 credit (each) or better.

- No new position for now. Unless, after closing one of the existing ones early in the week, the market goes to and oversold extreme. If that's the case I will be going back to the well with an October RUT Credit Put spread.

The LT Trend Sniper system will re-enter a long EURUSD position at the open on Sunday since Euro broke resistance on Friday.

Gold may also trigger a Buy signal this week if the triple top formation is broken.
Resistance has not been broken yet, but price has been hovering around the area for a while. So, anything is possible.

More details about the LT Trend Sniper automated trading system can be read here.

Economic Calendar

Tuesday: US Consumer Confidence. 
Wednesday: ADP Non-Farm Employment Change. US GDP. China's Manufacturing PMI.
Thursday: Europe CPI. US Pending Home Sales.
Friday: Non-Farm Payrolls. Unemployment Rate. ISM Manufacturing PMI.

Trade with confidence folks.

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Check out 2017 Track Record

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