The trading week ended on a quiet note; the market continues to consolidate at record levels.
Friday's trading pattern was similar to the previous week's end; SPX had a tight range of only 7 points from the low to the high of the day. The index closed at 2039.82, just about unchanged from the previous day. With such consolidation going on, it is very likely that there could be a pullback, even if temporary, before the next leg up. In the meantime, we will continue to monitor and manage our open positions as per the guidelines; without speculating on market direction.
Below is the status of the current open positions:
SPX Weekly Iron Condor
This week's SPX Iron Condor for the November cycle was filled yesterday for a net credit of $1.25. The position summary is as follows:
SHORT SPX November 2070 Call.
LONG SPX November 2080 Call.
SHORT SPX November 2000 Put.
LONG SPX November 1990 Put.
Below is the risk graph of the current position as of the close Friday:
SPX November Weekly Iron Condor
The position is currently +$25 as of the close. The risk graph above has some inaccurate figures (the graph indicates the position is +$44). This happens occasionally after-hours, as it also did last weekend. We received a $1.25 credit on entry, and the current debit to close is $1.00. The position is flat delta, so will benefit from a quiet day on Monday. The position will remain open until target gain is reached, but will be closed as per the guidelines if the pre-set max loss reaches ($87). However, I am recommending that the weekly Iron Condor be closed prior to the release of the FOMC minutes on Wednesday. While there are not expected to be any surprises, the minutes do tend to bring some volatility and it isn't worth risking a sharp move against the position with only one day left before expiration.
The chart below shows the short strikes:
SPX 6 month chart
SPY December Iron Condor
This monthly position was entered Monday, November 10. The position summary is:
SHORT SPY December 210 Call.
LONG SPY December 215 Call.
SHORT SPY December 195 Put.
LONG SPY December 190 Put.
Position entered for a net credit of $.89 (all four legs).
SPY closed Friday at 204.24, also unchanged from the previous day. The current position is shown below:
SPY December Iron Condor
The position is currently just above breakeven, so we will continue to monitor and let time decay work for us. The position will remain open as long as SPY stays between the short strikes until target gain is reached. It will be closed, however, if either short strike is touched, or if the pre-set max loss of $61 (15% of margin) is reached.
The six month chart is below, indicating the short strikes:
SPY 6 month chart
Next week brings quite a bit of economic news; a recap is below:
8:30 am Empire State Manufacturing Survey
9:15 am Industrial Production
8:30 am Producer Price Index
10:00 am Housing Market Index
8:30 am Housing Starts
10:30 am EIA Petroleum Status Report
2:00 pm FOMC Minutes
8:30 am Consumer Price Index
8:30 am Jobless Claims
10:00 am Philadelphia Fed Survey
10:00 am Existing Home Sales
New Trade Entry: RUT December Iron Butterfly
Next week is the planned entry for the monthly RUT Iron Butterfly. For those following or trading this strategy, the memory is still very vivid of last month's trade, where the sharp run-up caused us to have to exit the position for greater than the planned max loss. However, I still feel the trade is a solid play, so will plan to enter it once again for the December monthly cycle.
One modification to the guidelines under consideration is to purchase a long call at trade entry to cut the deltas in half. For those of you who are not familiar with an Iron Butterfly setup; the trade is negative delta by nature. A trade that is negative delta will get into trouble quicker with an upside move rather than a move to the downside. Adding the extra long call can smooth out the profit and loss line.
The guidelines call for the trade to be entered 31 - 30 days prior to expiration. I will definitely wait until after the FOMC minutes are released on Wednesday. I will look at a possible trade entry on Thursday of next week, if it appears that is a viable entry day from looking at the chart and overall market.
For those who may not be familiar with the RUT monthly Iron Butterfly, the guidelines were most recently posted on October 22, and can be found here: Link to Articles
Position updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,