A positive jobs report didn't stop the selloff at the close of the trading week, "good news can be bad news".
The market moved down sharply Friday, despite the addition of 295,000 jobs and a drop in the unemployment rate to 5.5%. The market appears to be caught between the implications of the strong jobs report, signaling the economy is growing; and the fear that the stronger economy will trigger the Fed to raise interest rates sooner rather than later.
SPX closed down 30 points Friday at 2071, a loss of 1.43% for the day. This was the steepest drop in two months, resulting in a 1.6% loss for the week.
The SPX weekly Iron Condor was opened yesterday at 10:45 when SPX was trading at 2090. Timing was less than perfect, to say the least. Immediately after the order filled, the decline accelerated, continuing into the close. My stop loss order for the pre-set max loss is in as a "good to cancel" contingent order to close the position if the debit reached 2.40. At the low of the afternoon, the position came to within .05 of the closing order, but it did not trigger so the position remains open.
Below is the current open position status:
SPX Weekly Iron Condor
This March 2 weekly position was opened Friday; trade details are:
- SOLD SPX March 2 2125 Call, 1.25 Credit.
- BOUGHT SPX March 2 2135 Call, .35 Debit.
- SOLD SPX March 2 2045 Put, 2.55 Credit.
- BOUGHT SPX March 2 2035 Put, 1.90 Debit.
Order was filled as an "Iron Condor" for $1.55 net credit (all four legs).
Margin/Risk is calculated by the width of the wings ($1,000), less credit received.
Margin/Risk for this week's trade: $845.
Target Gain: 7% of margin/risk or $60.
Max loss: 10% of margin/risk or $85.
The risk graph showing the position as of the close is below:
SPX March 2 Weekly Iron Condor
As of the close yesterday, the net debit to exit the position (all four legs) is $2.15, so the position is down $-60. With any help from the market on Monday, a bounce will certainly benefit the position. Otherwise, the stop loss order remains in place for $2.40, which would result in the 10% pre-set max loss. The SPX chart is below showing the short strikes:
SPX 6 month chart
I have indicated what I see as short term support at 2065; if that doesn't hold 2000 could be the next downside target.
With the drop in the market yesterday, the volatility index VIX jumped up 8.26% to close at 15.20. The six month chart of the so-called "fear index" is below:
VIX 6 month chart
Next week is a relatively quiet week for economic news; a recap is below:
10:30 am EIA Petroleum Status Report
8:30 am Retail Sales
8:30 am Jobless Claims
8:30 am Import/Export Prices
10:00 am Consumer Sentiment
Next week is the planned entry for the SPY Iron Condor for the April monthly cycle. Monday will be 39 days to expiration; so we will plan to enter the position sometime next depending on market conditions and available credit. For those unfamiliar with the trade, guidelines were last posted on September 10, 2013, and the article can be found at this link: Link to Articles
Position updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,