An interesting tidbit gleaned from the unemployment data that was reported several weeks ago was the fact that the 55 and older age group was the only segment of the population with positive net job growth. The rest of the population had a net job loss of 661,000, but the middle-age group gained almost a quarter million jobs. Over the past year, the other age brackets lost six million jobs but the older age group added 630,000 new positions. Even more remarkable is there was a 1.1% increase in the number of older Americans who worked multiple jobs, the only age group to have gained multiple jobs. Several analysts have concluded the reason for the relatively aggressive job hunting among the 55 and over group is that this age group was financially decimated by both the 2001 tech stock bubble burst AND the real estate meltdown seven years later! It should be very interesting to see what the outcome will be politically, and to the financial system if we have another jobless economic recovery?
Position Update
The entire position is $1,548 in the black
Bear Call Spread With three weeks until the July option expiration date we will consider opening another SPY Bear Call spread IF we can satisfy our original trade criterion - generate a minimum .55 net credit on the spread between the short and long strikes AND the short strike should fit our statistical probability profile (80% chance all the options will expire worthless)! Also, we need the short strike to exceed the redefined resistance levels:
$95 calculated based on previous closing highs and technical resistance levels
Bull Put Spread
Risk Analysis The reality is that the market still has not played its hand and no one can say conclusively whether the next high volatility medium-term move will be North or South. Market response after the two-day Federal Reserve Board meeting was uneventful and we are entering the summer months which normally have relatively light volatility compared to other times of the year. Most investors would probably bet the next big market move is to the downside, but we really don't know (and most investors are usually wrong anyway)! For us the benefit of the current indecisiveness is the premium is eroding from our sold options (money we hope to be able to keep). Since we closed out our short $100 strike call, the only risk we have to manage is the $86 strike price sold put. The risk associated with the sold put will be evaluated and resolved based on the Exit Plan below
Exit Plan Anytime the market maker is willing to accept a limit price of less than .11 on one of our short strikes, buy back all the short contracts and sell the long positions on the same spread. However, if it is a few days prior to the expiration date, we can hold out for a .05 bid. If the short put strike price is penetrated (closing price below the short put) AND the delta rises to .65 we will look to close out this spread (buy the short contracts, sell the long) and roll it out to the next month. Unless this is option expiration week, do not panic and rush to close the trade, many times the market will reverse itself and remove the sense of urgency. If the short strike has been violated and there is no price reversal, we cut our losses and live to fight another day. On option expiration day, if rules 1 and 2 above have not been activated, let the Bull Put spread expire worthless and we keep the entire sold premium for any open contracts where the short strikes are not threatened. We initiated the SPY Iron Condor as one order with four legs. The Bear Call spread has already been closed. The Bull Put spread will be closed out as a separate order following the Exit Rules described above. Final comment We still have 21days until the July option expiration date and the situation can change in a hurry. We will continue to listen to and understand what the market is telling us and manage our risk accordingly. Whichever direction the market goes we have a ready exit and are planning our next move! Gregory Clay
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