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BookingAlpha Option Trading Advisory

Saturday, December 2, 2017

Weekend Portfolio Analysis (December 2, 2017)

This week's analysis has been published at

Download Weekend Portfolio Analysis (2017-12-02).pdf

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The Weekend Portfolio Analysis will be available on this site next week for historical reference.

All currently open positions can be seen on the 2017 Track Record page and the 2018 Track Record page

Last Weekend Analysis now publicly available: Weekend Portfolio Analysis (November 25, 2017) 
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Recent Trading Activity

- Closed Dec SPX 2635/2640 Credit Call spreads at a $400 loss on Monday.

- Initiated small Dec SPX 2525/2520 Credit Put spreads on Monday for $250 credit to partially mitigate the Call side loss.

- Purchased Dec IWM 157 Calls ($225 debit), financed by the Sale of a small RUT 1450/1445 Credit Put spread position ($340 credit) on Monday. This maneuver was in order to protect the December RUT 1370/1380/1570/1580 Unbalanced Iron Condor.

- Initiated a small Dec SPX 2690/2695 Credit Call spread position on Thursday for $500 credit. Re-establishing an Unbalanced Iron  Condor. Thursday was rally day at one point SPX price was 3.5% higher than the 50-day moving average. Although not all the oscillators were in overbought territory, when the SPX is so far above its 50-day average, I automatically start to think about the possibility that it will not go that much further up without some kind of rest. I only regret not having sold more Credit Call spreads in the 2720/2725 area.

- Purchased Dec SPY 269 Calls ($351 debit), partially financed by the Sale of a small SPX 2480/2475 Credit Put spread position ($300 credit) on Monday. This hedge protects the Call side of the January SPX 2440/2450/2685/2695 Unbalanced Iron Condor.

Market Conditions
(Click on image to enlarge)
Stochastics: 83 (Overbought. Down from 94 last week)
McClellan: +53 (Neutral. Up from +78 last week)
Stocks above their 20 DMA: 67% (Neutral. Up from 64% last week)

No man's land.

Obviously close to overbought territory. Current SPX price is near the upper end of the long term uptrend channel. I was wrong last week about how far up the market could potentially go. A reminder that anything can happen at anytime. But now, this is the longer term channel that we are talking about this week and chances that it will be broken to the upside are smaller. Apparently the Tax Cuts are a done deal and I personally think that news has been priced-in already.

Friday's bar was pretty interesting and brought some volatility back (VIX at 11.43 now). There is strong support for this market. We've seen for months that every dip is bought aggressively. Evidently that will end one day, but Christmas 2017 may not be it. I have adopted a more bullish stance into year end with elevated Put side exposure that is not common in my trading.

The Russell:
(Click on image to enlarge)
RUT also rallied aggressively making that potential resistance line irrelevant very quickly. If nothing happens around it over the next few days, I'll delete it form the chart. Both the Dec15 and Dec29 positions are taking some heat on the Call side, but it is not the end of the world. Both are small Call spreads that would not inflict too much damage to the portfolio.

Current Portfolio

DEC SPX 2390/2400/2690/2695 Unbalanced Iron Condor
with additional DEC SPX 2525/2520 Credit Put spread
Net credit: $1,750. Two weeks to expiration. I'm not really concerned with the Put side despite its size.
(Click on image to enlarge)
Defense lines: 2,530 to the downside (adjust 2525/2520 Put spread) and 2,685 to the upside (adjust Call side).

DEC RUT 1370/1380/1570/1580 Unbalanced Iron Condor
with addition of  Long IWM 157 Calls and RUT 1450/1445 Credit Put spread
Net credit: $1,715. Two weeks to expiration. No real concerns on the Put side here either.
(Click on image to enlarge)
Defense lines: 1,455 to the downside (adjust 1545/1540 Credit Put spread) and 1,565 to the upside (adjust Call side).

DEC29 RUT 1410/1420/1590/1600 Iron Condor
A small $785 credit and four weeks to expiration. Showing a small loss at the moment but I'm not too concerned here due to the small position size. If a Call side adjustment is necessary I feel confident with deploying a larger number of contracts in this case.
(Click on image to enlarge)
Defense line: 1,425 (adjust Put side) and 1585 (adjust Call side)

Jan. SPX 2440/2450/2685/2695 Unbalanced Iron Condor
with additional Long SPY 269 Calls and 2480/2475 Credit Put spreads
The net credit now slightly down at $1,649. Seven weeks to expiration. The Call side is now hedged, so concerns on that end decrease.
(Click on image to enlarge)
Defense lines: 2,485 (adjust Put side) and 2,680 (adjust Call side).

Action Plan for the Week

- Despite the high capital allocation (74K deployed), I will initiate a RUT Unbalanced Elephant late in the week. Guidelines for entry are as usual (discussed in the Unbalanced Elephant guide on LTOptions)

- I'm willing to sell DEC15 SPX Credit Call spreads (small) in the 2,720 neighborhood at 0.50 credit or better.

- I'll adjust the DEC15 SPX 2690/2695 Credit Call spreads if the markets get close to 2,685. I'm willing to increase the number of contracts in this case. No additional margin is consumed since the Put side is larger and coverts it all.

- I'll adjust the DEC15 RUT 1570/1580 Credit Call spread if RUT gets near 1,565. I'm willing to deploy a greater number of contracts. No additional margin consumed. I'd be taking off the long IWM Calls for profits in this case, along with one of the Credit Put spreads in this position.

- I'll adjust the DEC29 RUT 1590/1600 Credit Call spread if RUT gets near 1585. I'm also willing to increase the number of contracts here.

- I'll adjust the JAN SPX 2685/2695 if SPX gets near 2,680. I'd be taking the long SPY off for gains in this case, along with one of the Credit Put spreads in this position.

Economic Calendar
Tuesday: US ISM Non-Manufacturing PMI, Services PMI.
Wednesday: ADP Non-Farm Employment Change.
Thursday: Europe and Japan's GDP
Friday:  US Non-Farm Payrolls. US Unemployment Rate.

Take it easy folks!

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