Fueled by a good jobs report, the market continues to drift higher.
The monthly jobs report released Friday by the Labor Department indicated the U.S. added 321,000 new jobs in November, over 90,000 more than expected. The economy has added more than 200,000 jobs a month for the last ten months, which is the first time thatâ€™s happened since 1994. This news kept the bulls in control for the end of the trading week.
Below is a status of our current open position:
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 $208.00, down just slightly from yet another intra-day high of 208.47. The current position is shown below:
SPY December Iron Condor
The position is currently +$33, despite being only 2 points from the short call strike of 210. The position is very negative delta (-21), so will benefit from any pullback. The Iron Condor will remain open as long as SPY stays between the short strikes until target gain is reached. The current debit to close the position is $.56; I have a "Good to Cancel" order in for $.48, would would result in the target gain.
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 is a very light week for economic news; a recap is below:
10:30 am EIA Petroleum Status Report
8:30 am Jobless Claims
8:30 am Retail Sales
8:30 am Import/Export Prices
10:00 am Business Inventories
8:30 am Producer Price Index
8:30 am Import & export prices
9:55 am Consumer Sentiment
New Trade Entry: January SPY Iron Condor
Monday will be 39 days prior to January monthly expiration; so we will look to enter the SPY Iron Condor sometime next week. Suggested trade entry will be posted when the order is submitted.
For those of you who may not have been following the monthly Iron Condor on SPY, a summary of the trade entry is as follows:
- Sell a short strike with a delta in the .15 - .20 range.
- Buy a long strike 5 points away from the short strike.
- Minimum credit (for both sides) should be at least .80, or it is not recommended to enter the position.
- Target gain is 10% of the actual margin/risk. This is calculated by the width of the wings (5 point in this case = $500), less the actual credit received. For a one-contract trade using the minimum credit of $.80, the margin/risk is $420. Target gain in this example is $42.
- Max loss is 15% of the margin, or $63 using this same example.
- This position will be traded as a "no touch"; it will remain open as long as SPY remains between the short strikes, until the garget gain is reached. The position will be exited at either short strike or the pre-set 15% max loss.
"Test Kitchen" 14-Day Iron Butterfly
In my article last Thursday I mentioned a new trade idea that I am considering adding to the mix of plays. This is a 14 or 15 day Iron Butterfly on SPX. If all goes according to plan, I will hope to enter a paper trade towards the middle of next week. I am not recommending this as a live trade yet; I want to test the strategy and analyze the results before putting live capital into the strategy.
I will post suggested trade entry at the time the order is submitted.
Position updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,