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BookingAlpha Option Trading Advisory

Sunday, August 26, 2018

Weekend Portfolio Analysis (August 26, 2018)

This week's analysis has been published at

Download Weekend Portfolio Analysis (2018-08-26).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The Weekend Portfolio Analysis will be available on this site next week for historical reference.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 2018 Track Record page

Previous Analysis now publicly available:
Weekend Portfolio Analysis (August 18, 2018) 
Recent Trading Activity

- No Activity. While working this past week at the Toronto offices it became literally impossible to do anything trading related. My reading of the market was good coming into the week with a bullish bias. All time higs were taken. The previous week's action plan should have been applied: Reopening Call side on the RUT Sept Elephant; deploying first October position. But again, between meetings and a very demanding schedule, I simply had no time to patiently enter orders, wait for fills, write blog articles about it.

Market Conditions
(Click on image to enlarge)
Stochastics: 86 (Overbought. Up from 56)
McClellan: +71 (Neutral. Up from +43)
Stocks above their 20 DMA: 63% (Neutral. Up from 51%)

No man's land

Long term resistance finally surpassed. The index is about 2.6% higher than its 50-day average. So, despite the fact that we are in no man's land, the potential upside starts to become more limited in the short-term. A 1% move higher from here would probably put us in extremely bullish territory. But for now, with a low VIX, all-time highs just taken, still no-man's, shorting the market directly via Call options alone doesn't look like a good idea.

Looking down, I'm still using that red diagonal line at the bottom as potential long term support, situated in the low 2,700's.

The Russell Index:
(Click on image to enlarge)
The RUT easily went to new highs. Much more convincingly than the S&P500. The index is now 2.4% higher than its 50-day average, leaving some more upside room. There should be some sort of sideways action soon in the major indexes, but this recent run up still has a little room (I think). September is around the corner and trading activity (volume) should start to increase little by little.

Current Portfolio:
The SPY Calls and SVXY Calls expire in December and January of next year. All bullish bets on a market rebound.

Let's now look at the income plays.

Sep RUT/IWM 1530/1540 - 158  Elephant Put side
Net Credit: $1096. Four weeks to expiration
(Click on image to enlarge)
Defense lines: 1,580 to the downside (adjust Put side). Call side taken off at a profit and now I'm ready to redeploy it.

Sep SPX/SPY 2645/2650/2925/2935 - 269/293 Elephant
Net Credit: $1438. Four weeks to expiration
(Click on image to enlarge)
Defense lines: 2,640 to the downside (adjust Put side) and 2,885 to the upside (Close all Calls at a loss. Keep riding Put side, whose credit is greater than the loss to be suffered on the Call side, resulting in an overall net winning trade). Call side under pressure, may need to be taken off this week. Despite that, the position as a whole is showing profits as illustrated by the T+0 (pink) line being above the break-even line for the current SPX price.

Action Plan for the Week

Exact same plan as last week.

- Defend SPX September Elephant by simply closing the Call side if the index reaches 2,885 or so.

- Deploy a new Call side component on the RUT September position, completing an Elephant again. The candidate is the 1780/1790 Credit Call spread, and as usual with an upside IWM hedge (179 strike Call)

- Deploy the first October position. I'll go with an SPX Elephant, because we are not oversold. I will enter it on Monday or Tuesday. It will be done following the Elephant guidelines.

Economic Calendar

Tuesday: US CB Consumer Confidence.
Wednesday: US Pending Home Sales. GDP.
Friday: Europe CPI and Unemployment. Chicago PMI. Michigan Consumer Sentiment and Expectations.

Take it easy folks!

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Check out 2018 Track Record

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