Market Summary
The February bottom is playing out to be a normal short-term correction within the context of a longer term bull market. Most of the major indexes achieved new 52-week highs, and relatively soon we will know whether the current market upturn has legs. But similar to what happened at the end of last summer; an overbought rally can continue indefinitely, we need to see how this plays out. Stocks are advancing on lower than normal volume- very soon we should find out if prices are at a resistance level, with a double-top and pullback. Obviously, the ideal scenario for our iron condors is a minor correction to relieve the pressure on the short calls.

SPY Position Update
Listed below is the status of our SPY Iron Condor trade as of Friday March 12th. This position has been open for 11 days:
The entire position is $1,020 in the red
SPY closed at $115.46
30-day historical volatility and implied volatility are extremely low - which is considered bullish
SPY is priced ABOVE its' current 14-day EMA (see SPY chart down below)
SPY is trading ABOVE its' 20-day Bollinger Band SMA, and 50-day simple moving average (see SPY chart)
SPY is still well ABOVE its' 200-day simple moving average (see SPY chart)
Relative Strength Indicator (RSI) is EXTREMELY bullish (See SPY chart)
Moving Average Convergence/Divergence (MACD) is EXTREMELY bullish (See SPY chart)

SPY Bear Call Spread
This spread is $1,870 in the red (see tables below)
Our $115 strike price short call delta is .4968 (50% probability this position will be profitable)

SPY Bull Put Spread
This spread is $850 in the black (see tables below)
Our $107 strike price short call delta is .0667 (93% probability this position will be profitable)

SPY Risk Analysis
Until the market identifies a firm resistance level during the current uptrend, we must assume the $115 strike short call will remain at risk. There are over two weeks until March Quarterly options expire and we need to trade what we see (not what we want) and be prepared to make a move take if stocks continue to rise.

MDY Position Update
Listed below is the status of our MDY Iron Condor trade as of Friday March 12th. This position has been open for 20 days:
The entire position is approx $1,460 in the red
MDY closed at $142.48
30-day historical volatility and implied volatility are extremely low - which is considered bullish
MDY is priced ABOVE its' current 14-day EMA (see MDY chart down below)
MDY is trading ABOVE its' 20-day Bollinger Band SMA, and 50-day simple moving average (see MDY chart)
MDY is still well ABOVE its 200-day simple moving average (see MDY chart)
Relative Strength Indicator (RSI) is EXTREMELY bullish (See MDY chart)
Moving Average Convergence/Divergence (MACD) is EXTREMELY bullish (See MDY chart)

MDY Bear Call Spread
The March 11th Couch Potato recommended closing out the initial call spread for an approx. $4,750 loss and following up with a TRADE ADJUSTMENT to roll up to a higher strike price March expiration call spread (see tables below) - After the trade adjustment the call spread(s) should be approx. $3,200 in the red

MDY Bull Put Spread
The March 8th Couch Potato recommended closing out the initial put spread for an approx. $990 gain. The March 11th Couch Potato followed up with a TRADE ADJUSTMENT to roll up to a higher strike price March expiration put spread (see tables below) - After the trade adjustment the put spread(s) should be approx. $1,740 in the black

MDY Risk Analysis
MDY options expire on Friday and the obvious risk is that the highly overbought rally continues and threatens further short call losses. The Federal Reserve meeting is Tuesday and other key economic reports are due next week, and Friday is quadruple witching with four types of March futures and options contracts set to expire; we will put a tight leash on the MDY short options.

Exit Plan
The rules for exiting the MDY credit spreads are:

Anytime the market maker is willing to accept a limit price of less than .05 on one of the short strikes, buy back all the short contracts and sell the long positions on the same spread.

At market close, if the delta associated with one of the short strikes is above .50 we will look to close out this spread (buy the short contracts, sell the long).

Friday is expiration day for the MDY options, and if rules 1 and 2 above have not been activated, let the option contracts expire worthless and we keep the entire sold premium for any open contracts where the short strikes are not threatened.

The rules for exiting the SPY credit spreads are:

Anytime the market maker is willing to accept a limit price of less than .11 on one of the short strikes, buy back all the short contracts and sell the long positions on the same spread.

At market close, if the delta associated with one of the short strikes is above .65 we will look to close out this spread (buy the short contracts, sell the long).

March 31st is expiration day for the SPY options, and if rules 1 and 2 above have not been activated, let the option contracts expire worthless and we keep the entire sold premium for any open contracts where the short strikes are not threatened.

Final comment
Stocks have marched upward virtually unabated off the February lows – though the rise is on lower than normal volume, it still counts. In the past we have commented on how range-bound trading is the ideal scenario for market neutral trading strategies similar to the iron condor. Over the past few months' stocks have basically avoided trading in a range for more than a week. The market does whatever it wants to do, regardless of what we want; it is important for us to recognize the trend (up, down, range-bound) and have the next moved planned based on the risk to our position.

Gregory Clay

Couch Potato Trader Disclaimer
All results reported in this section are hypothetical. While the numbers represented here may have been achieved or beaten by our readers, we make no representation that any individual investor achieved these exact results. The tracking for the plays listed in this section uses closing prices for the day the newsletter is published and it is not meant to imply that any reader actually received those prices (though many often do) or participated in these recommendations (even though many do). The portfolio represented here is hypothetical and for investment education purposes only. It is only an illustration of what type of gains a knowledgeable trader might receive utilizing these strategies. If you don't get close to these results, guess what. It isn't the fault of the strategies.